Central Bank leaves rates unchanged in November

November marks the second consecutive hold, as expected: At its meeting on 19–20 November, the Central Bank decided to keep the BI-Rate steady at 6.00% while also maintaining the Deposit Facility (DF) rate at 5.25% and the Lending Facility (LF) rate at 6.75%. The decision was the second consecutive hold in two months and had largely been priced in by markets.

Rupiah volatility motivates BI’s hold: In a press conference, Governor Perry Warjiyo stated that, despite low inflation and the need to support economic growth, the priority was maintaining rupiah stability amid increasing geopolitical and global economic uncertainty, particularly due to political developments in the U.S. Following Donald Trump’s election as U.S. President in early November, the rupiah lost ground against the USD, as markets braced for smaller Fed cuts. Meanwhile, BI maintained its GDP growth forecast of 4.7–5.5% for 2024 and penciled in an improvement in 2025. It also sees inflation remaining within the 1.5–3.5% target range next year.

Policy outlook: With regard to future decisions, BI stated that it would “remain vigilant of Rupiah exchange rate movements and the inflation outlook as well as data developments and emerging dynamic conditions when considering further room for monetary easing.” That said, the BI’s assessment of the U.S. economy under President-elect Trump—trade tariffs and tax cuts fueling inflation and hindering the Fed’s rate cuts—has likely limited the scope for interest rate cuts in Indonesia. Our Consensus is for a final 25 basis point cut in December and for about 75 basis points of further reductions in 2025 as a whole. Upside risks to the BI rate include a weaker rupiah and higher-than-expected inflation. BI will reconvene on 17–18 December.

Panelist insight: United Overseas Bank’s Enrico Tanuwidjaja said: “Based on [November’s] monetary policy decision by BI, we continue to view the current rate-cutting cycle is likely to be a pause rather than an end of its rate-cutting cycle. […] Consequently, our view remained for BI to continue its rate cutting cycle, possibly in Dec with a 25bps cut to 5.75%. We also keep our view that for 2025, with a cumulative 100bps cuts for the BI rate to reach 4.75% by the end of next year.” Nomura’s Euben Paracuelles and Nabila Amani commented: “We believe BI still sees growth as below-potential and expects inflation to remain well-behaved, therefore providing scope for further rate cuts, but only to the extent the external environment allows. As such, in terms of timing, we still expect BI to cut by 25bp in December, which would be consistent with BI’s assumption of the Fed cutting by 25bp on the same day. Beyond that, we expect another 25bp cut by BI in March 2025, well before the implementation of Trump policies, which our US team expects from mid-2025, in line with BI’s assumption.”

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