Bank Indonesia (BI) surprises with a 25 bps rate cut, lowering its policy rate to 5.75% at its first Board of Governor meeting for this year, beating house and market expectations
Deposit and Lending Facility Rates: Reduced to 5.00% and 6.50%, respectively.
BI statement: The decision aligns with low inflation target range of 1.5% - 3.5% for 2025 and 2026, aims to stabilise the Rupiah, and supports economic growth. It signals a policy shift prioritising growth amid global economic uncertainties while balancing Rupiah's stability.
Slower growth projected, with stable inflation
GDP: BI revised 2025 growth forecast to 4.7% - 5.5%, slightly lower than 4.8% - 5.6% previously, citing weaker exports, subdued household demand, and lower private investment. For 2024, growth is expected to settle slightly below the midpoint of the 4.7% - 5.5%, reflecting softer domestic demand.
Inflation: CPI inflation averaged 2.3% in 2024, within the BI's target range of 1.5% - 3.5%. Inflation is expected to remain within target in 2025, supported by ample domestic capacity to meet demand.
Rupiah: As of January 14th, the Rupiah has depreciated by 0.4% against the USD since end-2024. However, it outperformed regional peers, including the Thai Baht (-1.7%), Philippine Peso (-0.9%), and Malaysian Ringgit (-0.9%), due to BI's stabilisation measures and foreign capital inflows, supported by attractive domestic yields and positive economic prospects.
Further monetary easing expected amid subdued growth and rising external headwinds
Policy stance: The rate cut was unexpected as BI previously emphasised that its near-term policy stance is aimed at rupiah stability amid strong USD. The shift reflects a focus on boosting growth amid slowing domestic expansion, low inflation, and rising global uncertainties, including geopolitical tensions, China's weak recovery, and policy changes in the US under the newly-elect President Donald Trump.
Room for easing: Bi is expected to continue easing to support economic growth. However, concerns over rupiah stability may lead to a gradual and cautious approach, especially as the US Fed may slow rate cuts due to a resilient US economy. Nonetheless, we expect two more cuts, bringing BI's policy rate to reach 5.25% in 2025.
USDIDR year-end forecast (16,050; 2024: 16,221): We expect the Rupiah to gradually strengthen by the end of 2025 on the expectations of lower US policy rate and an improving domestic economy.
New IPO: ES Sunlogy Berhad, a provider of mechanical and electrical (M&E) engineering services and renewable energy solutions, aims to list on the ACE Market!
MQ Trader 1484 views | 11 d ago
0:17
New IPO: Techstore Berhad, an IT security and automation solutions provider, aims to list on the ACE Market!
MQ Trader 1162 views | 12 d ago
0:17
New IPO: Richtech Digital Berhad, a distributor of electronic reloads and digital payment solutions, aims to list on the ACE Market!
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....