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Investing.com -- Bank Indonesia (BI) maintained its main policy rate at 5.75% on Wednesday, aligning with the forecasts of 26 out of 35 analysts surveyed by Bloomberg.
Despite this decision, the central bank signaled potential rate cuts later in the year, according to Capital Economics, which remains firm in its projection of gradual rate reductions throughout 2025.
Governor Perry Warjiyo’s press conference presented a slightly more cautious stance compared to the previous month, where the central bank seemed more focused on economic support.
Nonetheless, Warjiyo indicated openness to easing monetary policy in the future. BI’s goals include managing inflation and ensuring exchange rate stability.
With January’s inflation at a modest 0.8% year-on-year, partly due to a temporary decrease in electricity tariffs, BI appears to have room for maneuver on the inflation front.
The global economic landscape continues to present challenges, potentially affecting the volatility of exchange rates. However, the rupiah’s performance has been relatively stable since the January rate cut, staying near the levels it was before the cut and close to the multi-year lows from mid-last year.
Warjiyo emphasized that a stable currency is measured relative to its peers, not solely against the US dollar.
Capital Economics stands out with its expectation of a 150 basis point reduction in rates for 2025, a more dovish outlook compared to the consensus.
This anticipation builds on the central bank’s current position and the low inflation environment, suggesting a more accommodative monetary policy could be on the horizon for Indonesia.
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