JAKARTA (Nov 29): Bank Indonesia (BI) will maintain its benchmark rate at the current level into 2024 barring any major changes in global dynamics, Governor Perry Warjiyo said on Wednesday, signalling the central bank is done with its rate hiking cycle.

Speaking at an annual gathering of financial executives and government officials hosted by the central bank, Warjiyo said the benchmark seven-day reverse repurchase rate at 6% should be sufficient to keep domestic inflation within a target range of 1.5% to 3.5% in 2024 and 2025. The bank's inflation target range this year is 2% to 4%.

"To ensure inflation remains under control within target... the BI rate will be maintained, with further responses to be aligned with global and domestic economic dynamics," the governor said.

BI has hiked interest rates by a total of 250 basis points (bps) since August 2022 to October, with its latest rate hike made in response to a plunge in the rupiah's exchange rate amid capital outflows linked to the US monetary tightening.

Warjiyo expected the rupiah to become more stable in 2024, with the Federal Reserve expected to cut US rates by 50 bps in the second half of next year.

The rupiah strengthened on Wednesday ahead of the gathering.

With the monetary policy guidance, Warjiyo put Indonesia's GDP growth outlook within a range of 4.7%-5.5% for 2024 and 4.8%-5.6% for 2025, and between 5.3% and 6.1% in the medium term, by 2028. These figures were stronger than BI's 2023 growth outlook of 4.5%-5.3%.

Next year, higher civil servant salaries, spending for elections on Feb14, the construction of Indonesia's US$32 billion (RM148.8 billion) new capital city project, and exports of processed natural resources will provide tailwind to growth, Warjiyo said.

Still, headwinds are expected from weakening global economic growth.

"Geopolitics is affecting geo-economy. As a result, global economic prospects will weaken in 2024 before improving in 2025," he said.

Speaking at the same event, President Joko Widodo warned Indonesian financial executives of the unpredictability of wars happening in other parts of the world and their impact on domestic economy.

He urged banks to prioritise lending over putting any excess liquidity into government bonds or BI's securities.

BI expects loan growth to pick up to 10-12% in 2024 and 11-13% in 2025, from 9-11% this year, Warjiyo said.