JAKARTA- Indonesia’s central bank will focus monetary policy in the short term on keeping the rupiah stable while monitoring for opportunities to further lower its main interest rate in 2025, Governor Perry Warjiyo said on Friday.
Global economic uncertainties remain high following Donald Trump’s victory in the US election, which is seen affecting global growth and the US Federal Reserve’s policy moves, Warjiyo told an annual dinner with financial executives and government officials.
Bank Indonesia (BI) cut interest rates in September, just ahead of the US Federal Reserve starting its easing cycle, but since then has held key rate at 6 percent.
“The re-election of President Trump with his ‘US first’ policies could bring major changes to the geopolitical landscape and the world’s economy, such as high tariffs and even trade wars,” Warjiyo said.
“Global growth will decline in 2025 and 2026. The US is improving, China and Europe will slow down, India and Indonesia’s performance to remain relatively well.”
The BI will keep interest rates steady for now as global turbulence requires the bank to focus on stabilization of the rupiah, Warjiyo said.
“We continue to monitor room for further BI rate reduction,” he added.
BI has so far held back from further easing due to increased volatility in the rupiah.
The Indonesian currency which is sensitive to changes in risk appetite, has come under pressure amid capital outflows as markets reacted to Trump’s victory.
BI will use its other instruments to support growth and strengthen coordination with the government to withstand external shocks, Warjiyo said.
BI expects Indonesia’s economy to grow by 4.8 percent -5.6 percent in 2025 and 4.9 percent -5.7 percent in 2026, while targeting inflation to remain within the target range of 1.5 percent to 3.5 percent until 2026. It forecasts a current account deficit of 0.5 percent to 1.3 percent of GDP next year and expected to widen to 0.6 percent to 1.4 percent of GDP in 2026.
