Macroeconomic Analysis Series: BI Board of Governor Meeting, February 2025

Jahen F. Rezki (), Teuku Riefky (), Faradina Alifia Maizar (), Difa Fitriani (), Mervin Goklas Hamonangan () and Alif Ihsan A Fahta ()
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Jahen F. Rezki: Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI)
Teuku Riefky: Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI)
Alif Ihsan A Fahta: Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI)

No 202502, LPEM FEBUI BI Board of Governor Meeting Brief from LPEM, Faculty of Economics and Business, University of Indonesia

Abstract: eadline inflation in January 2025 was 0.76% (y.o.y), hitting its lowest since 2000 and fell below Bank Indonesia’s target range. This was mainly driven by the 50% discount on electricity bills for certain household groups. During last month, the Fed expectedly kept its policy rate unchanged and Bank Indonesia unexpectedly cut its policy rate despite massive pressure on Rupiah. In addition, the newly inaugurated President Trump has launched a mix of policies, including stricter immigration measures that tighten the labour market, corporate tax rate cuts, and various tariff hikes, which potentially could cause higher inflation rate in the US and affect global uncertainties. These three factors played a massive role in the dynamic of capital flows in Indonesia and the movement of Rupiah in the past few weeks. Going forward, the upcoming Ramadan period might trigger domestic inflationary pressures. Furthermore, the shift of gear by the Fed towards a less aggressive monetary easing and rapidly evolving policy stance of President Trump might affect investors’ perceptions unpredictably. In addition, despite gradually appreciating, Rupiah is still relatively volatile. Considering all these aspect and that Rupiah is still relatively volatile, Bank Indonesia should keep its BI Rate unchanged at 5.75% in its Board of Governors meeting in February 2025.

Keywords: gdp; —; economic; —; economic; outlook; —; inflation; —; macroeconomics; —; interest; rate (search for similar items in EconPapers)
Date: 2025-02, Revised 2025-02
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