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The BI Board of Governors Meeting agreed on 23rd – 24th April 2024 to raise the BI-Rate by 25bps to 6.25%, while also increasing the Deposit Facility (DF) rate and Lending Facility (LF) rate by 25bps to 5.50% and 7.00% respectively. The decision to raise the BI Rate strengthens Rupiah stability against the impact of deteriorating global risk and as a pre-emptive and forward-looking measure to maintain inflation within the 2.5%±1% target corridor in 2024 and 2025 in line with the pro-stability monetary policy stance.  Meanwhile, Bank Indonesia will maintain pro-growth macroprudential and payment system policies to foster sustainable economic growth. Furthermore, Bank Indonesia will hold an accommodative macroprudential policy posture to revive bank lending/financing to businesses and households.  Payment system policy will be oriented towards bolstering reliable infrastructure and reinforcing the structure of the payment system industry, while expanding acceptance of payment system digitalisation.​

Bank Indonesia has, therefore, strengthened its mix of monetary, macroprudential and payment system policies to maintain stability and nurture sustainable economic growth against a backdrop of increasing global financial market uncertainty through the following measures:

1. ​​Increasing the interest rate structure in the Rupiah money market in line with the BI-Rate hike, higher U.S. Treasury yield and global risk premium to maintain attractive yields and portfolio inflows to domestic financial assets for investment, thus strengthening Rupiah stability.
2. Stabilising the Rupiah through foreign exchange market intervention with a focus on spot and Domestic Non-Deliverable Forward (DNDF) transactions, as well as government securities (SBN) in the secondary market.
3. Strengthening the competitive SBN term-repo and FX swap transaction strategies to maintain adequate liquidity in the banking industry.
4. Strengthening the pro-market monetary operations strategy for effective monetary policy, which includes optimising Bank Indonesia Rupiah Securities (SRBI), Bank Indonesia Forex Securities (SVBI) and Bank Indonesia Forex Sukuk (SUVBI).
5. Strengthening the implementation of accommodative macroprudential policy to revive lending/financing and support sustainable economic growth, while maintaining financial system stability by:
   1. Strengthening Macroprudential Liquidity Policy Incentives (KLM) to revive lending/financing by expanding the scope of priority sectors, namely downstream supporting sectors, construction and productive real estate, the creative economy, automotive sector, trade, electricity, gas and water supply as well as social services, while also adjusting the size of the incentive for each sector, effective from 1st June 2024 (Appendix 1),
   2. Maintaining the: (a) Countercyclical Capital Buffer (CCyB) at 0%, (b) Macroprudential Intermediation Ratio (MIR) in the 84-94% range, (c) Macroprudential Liquidity Buffer (MPLB) at 5% with repo flexibility of 5% and the sharia MPLB at 3.5% with repo flexibility of 3.5%.
      
6. ​Strengthening prime lending rate (PLR) transparency policy with a focus on interest rates by economic sector (Appendix 2).
7. Strengthening digital literacy and risk management amongst payment system operators and users, including various innovations to support such initiatives, thereby strengthening payment system stability to support sustainable economic growth.

​Policy coordination between Bank Indonesia and the Government is also constantly strengthened to mitigate the impact of spillovers from deteriorating global risk. In term of controlling inflation, Bank Indonesia strengthens policy coordination with the (central and regional) Government through the National Movement for Food Inflation Control (GNPIP) in various regions within the Central Government and Regional Government Inflation Control Teams (TPIP and TPID). Monetary and fiscal policy coordination is strengthened to maintain macroeconomic stability and economic growth momentum. Furthermore, policy synergy between Bank Indonesia and the Financial System Stability Committee (KSSK) is also strengthened to maintain financial system stability and revive lending/financing to businesses.

Global economic and financial dynamics are changing rapidly with increasing risks and uncertainty as a corollary of changes in the direction of US monetary policy and deepening geopolitical tensions in the Middle East.  Persistently high inflation and solid economic growth in the United States (US) have triggered speculation of a high for longer Federal Funds Rate (FFR), echoing the recent statements by Federal Reserve System officials. These developments and the massive need for US debt have pushed up US Treasury yields and precipitated broad-based US dollar appreciation globally.  The strong US dollar is also attributable to depreciation among other global currencies, including the Japanese yen and Chinese yuan.  Moreover, global financial market uncertainty is increasing due to escalating geopolitical tensions in the Middle East.  Consequently, global investors are rebalancing their portfolios towards safer assets, specifically US dollars and gold, thus triggering larger capital outflows and currency depreciation in emerging market economies (EMEs). Moving forward, the risks associated with the direction of FFR reductions and the dynamics of global geopolitical tensions will continue to demand vigilance due to their potential for exacerbating global financial market uncertainty, intensifying inflationary pressures and undermining the world economic growth outlook.  Such conditions require a strong policy response to mitigate the adverse impact of global uncertainty spillovers on emerging market economies, including Indonesia.

At home, Indonesia's economy remains resilient despite the build-up of global uncertainty.  Economic growth in the first two quarters of 2024 is expected to exceed growth recorded in the fourth quarter of 2023 on the back of persistently solid domestic demand in the form of household consumption during the Ramadan and Eid-ul-Fitr 1445H festive period. Building investment is outperforming the previous projection due to ongoing national strategic projects in several regions and private property development as a positive outcome of government incentives.  Notwithstanding, household consumption and non-building investment must be increased further to ensure the national economic recovery remains intact.  Meanwhile, goods exports remain unfazed by declining commodity exports given lower international commodity prices and weak demand from Indonesia's main trading partners, such as China.  By sector, the Manufacturing Industry, Information and Communication, Wholesale and Retail Trade, as well as Construction are projected to maintain solid growth.  Spatially, economic growth in all regions remains solid, supported by domestic demand, particularly household consumption.  Consequently, economic growth in 2024 is projected in the 4.7-5.5% range.  Moving forward, Bank Indonesia will continue strengthening synergy between macroprudential policy and the fiscal stimuli implemented by the Government to foster sustainable economic growth, particularly from the domestic demand side.

Indonesia's Balance of Payments (BOP) surplus supporting external resilience.  The goods trade balance in the first quarter of 2024 maintained a surplus, which is expected to sustain a healthy current account (CA).  Meanwhile, the capital and financial account is forecast to run a deficit in the first quarter of 2024 as foreign capital flows recede in response to increasing global financial market uncertainty. Portfolio investment in the first quarter of 2024 recorded a net outflow totalling USD0.4 billion, with the trend persisting at the beginning of the second quarter (as of 22nd April 2024), amassing a net outflow of USD1.9 billion.  External resilience in Indonesia against the impact of global spillovers is supported by strong coordination between the monetary and macroprudential policies of Bank Indonesia with the fiscal policy and structural reforms implemented by the Government. The position of reserve assets at the end of March 2024 remained high at USD140.4 billion, equivalent to 6.4 months of imports or 6.2 months of imports and servicing government external debt, which is well above the international adequacy standard of around 3 months of imports. Overall, BOP performance in 2024 is projected to be maintained underpinned by a low and manageable current account deficit in the 0.1%-0.9% of GDP range.  Meanwhile, Bank Indonesia expects the capital and financial account surplus to persist on the back of foreign capital inflows – as global financial market uncertainty eases – and positive investor perception of the promising domestic economic outlook along with attractive yields on financial assets for investment.

Bank Indonesia continues orienting exchange rate policy towards maintaining Rupiah stability against the impact of broad-based US dollar appreciation.  The DXY index increased sharply to peak at 106.25 on 16th April 2024, appreciating 4.86% on the level recorded at the end of 2023.  Such conditions intensified depreciatory pressures on nearly all global currencies, including the Rupiah.  The Japanese Yen and New Zealand Dollar depreciated 8.91% and 6.12% (ytd) respectively, while in the region, the Thai baht and South Korean won depreciated 7.88% and 6.55% (ytd).  In contrast, Rupiah depreciation was less severe at just 5.07% (ytd) as of 23rd April 2024.  Bank Indonesia continues strengthening Rupiah stabilisation policy by optimising the full panoply of monetary instruments available, including foreign exchange market intervention with a focus on spot and Domestic Non-Deliverable Forward (DNDF) transactions, purchasing SBN in the secondary market as required, maintaining adequate liquidity as well as instituting other measures as necessary.  Meanwhile, Bank Indonesia continues optimising its pro-market monetary operations strategy through the SRBI, SVBI and SUVBI instruments to attract portfolio inflows from abroad.  Moreover, Bank Indonesia will continue strengthening coordination with the Government, banking industry and businesses to support the effective implementation of instruments that retain the proceeds of natural resources exports in accordance with Government Regulation Number 36 of 2023 concerning the Foreign Exchange Proceeds of Exports and the Exploitation, Management and/or Processing of Natural Resources.

Inflation has been maintained within the 2.5%±1% target corridor.  Consumer Price Index (CPI) inflation in March 2024 was recorded at 3.05% (yoy), supported by low core inflation at 1.77% (yoy) and administered prices inflation that fell to 1.39% (yoy).  Conversely, volatile food (VF) inflation increased to 10.33% (yoy) from 8.47% (yoy) the month earlier, primarily edged up by seasonal factors during the national religious holidays and a delayed planting season due to the impact of El Niño.  Moving forward, Bank Indonesia is confident that CPI inflation in 2024 will remain under control and within the target corridor. Low core inflation is expected in line with anchored inflation expectations, massive economic capacity in response to domestic demand, low imported inflation in line with Rupiah stability, as well as the positive impact of digitalisation.  Bank Indonesia also expects VF inflation to fall as production increases at the onset of the harvesting season, supported by inflation control synergy with the TPIP and TPID teams through the GNPIP movement in various regions.  Bank Indonesia will continue strengthening its monetary policy mix to mitigate the risks that could intensify inflationary pressures, including higher imported inflation as well as higher global energy and food prices.  Bank Indonesia will also continue bolstering policy synergy with the (central and regional) Government to maintain inflation in 2024 within the 2.5%±1% target range.

Bank Indonesia continues optimising its pro-market monetary operations strategy to strengthen the monetary policy response in terms of controlling inflation and maintaining Rupiah stability.  To that end, Bank Indonesia is optimising various pro-market monetary instruments issued in 2023, namely SRBI, SVBI and SUVBI, to support money market deepening efforts and attract capital inflows, thereby supporting Rupiah stabilisation efforts.  As of 23rd April 2024, the respective positions of SRBI, SVBI and SUVBI instruments stood at Rp393.66 trillion, USD1.89 billion and USD334 million. SRBI issuances attracted portfolio inflows to Indonesia, as reflected by non-resident holdings of SRBI totalling Rp71.55 trillion (18.18% of total outstanding).  Moving forward, Bank Indonesia will continue optimising the various innovative pro-market instruments in terms of volume and attractive yields in pursuit of further portfolio inflows to domestic financial markets.

Monetary policy transmission remains effective. The IndONIA money market reference rate is moving within the BI-Rate range, recorded at 5.93% on 23rd April 2024.  SRBI rates remain attractive at 6.81%, 6.82%, and 6.94% for tenors of 6, 9 and 12 months respectively (as of 19th April 2024), up from 6.72%, 6.71%, and 6.90% on 22nd March 2024, thereby supporting SRBI effectiveness as a pro-market monetary instrument.  Meanwhile, the banking industry maintained competitive interest rates given adequate liquidity in the banking system and PLR transparency policy to increase interest rate efficiency in the banking industry.  Accordingly, the 1-month term deposit rate and lending rate were stable in March 2024 at 4.53% and 9.25% respectively.  Meanwhile, the yields on SBN of 2 and 10-year tenors increased to 6.85% and 7.05% in line with higher US Treasury yields and global financial market risk premia.

Loans disbursed by the banking industry continue tracking an upward trend.  Credit growth in the first quarter of 2024 was recorded at 12.40% (yoy), driven by loans extended to nearly all economic sectors.  On the supply side, high credit growth was attributable to maintained lending appetite in the banking industry as a consequence of solid capital capacity and ample liquidity.  This was reflected by a high ratio of liquid assets to third-party funds (LA/TPF) at 27.18% and supported by KLM from Bank Indonesia.  Pursuing credit growth targets in 2024 against 7.44% (yoy) growth of third-party funds in March 2024, banks continue optimising credit funding through an asset management strategy that prioritises safety, liquidity and profitability. On the demand side, loan growth is supported by sales performance and corporate investment, which are expected to continue tracking upward trends after the general election, as well as maintained household sector performance.  By loan type, credit growth is primarily supported by investment loans, working capital loans and consumer loans, growing 14.83% (yoy), 12.30% (yoy) and 10.22% (yoy) respectively.  Furthermore, sharia financing maintained high growth at 15.26% (yoy) in the first quarter of 2024, while MSME loans increased by 8.12% (yoy).  Consequently, Bank Indonesia projects credit growth to increase in the 10-12% range in 2024. 

Bank Indonesia will also continue strengthening the implementation of KLM. Moving forward, KLM incentives will be strengthened by optimising the liquidity incentives available and expanding the scope of priority sectors that contribute significantly to national economic growth.  Strengthening KLM aims to immediately provide additional banking liquidity to the tune of Rp81 trillion, bringing the total incentive to Rp246 trillion.  Furthermore, given accelerating credit growth, the additional liquidity from the KLM incentives is expected to reach Rp115 trillion by the end of 2024, thus bringing the total incentive to Rp280 trillion. Bank Indonesia will continue strengthening the effectiveness of accommodative macroprudential policy implementation in synergy with the KSSK Committee, banking industry and businesses to provide tangible support to increase lending/financing for sustainable economic growth.

Financial system resilience remains solid and is strengthening credit growth in 2024.  Banking resilience is reflected by ample bank liquidity, lower credit risk and solid capital capacity.  Bank liquidity remains adequate, as reflected by a high ratio of liquid assets to third-party funds (LA/TPF) in March 2024. The Capital Adequacy Ratio (CAR) in the banking industry is still high at 27.73%, recorded in February 2024, supported by low credit risk, as indicated by NPL ratios of 2.35% (gross) and 0.82% (nett).  Solid banking industry resilience is also supported by sound corporate repayment capacity.  The results of BI stress tests further confirmed solid banking industry resilience in the face of various pressures, thereby mitigating the impact of global financial market uncertainty on financial system stability. Bank Indonesia will continue strengthening synergy with the KSSK Committee to mitigate various risks that could potentially disrupt financial system stability.

Payment system transactions continue to perform solidly.  In the first quarter of 2024, BI-RTGS transactions increased 6.62% (yoy) to reach Rp42,005.48 trillion, while BI-FAST transactions increased 55.40% (yoy) to reach Rp1,760.59 trillion.  The value of digital banking transactions grew 16.15% (yoy) to Rp15,881.53 trillion and the value of electronic money transactions grew 41.70% (yoy) to Rp253.39 trillion.  The value of QRIS transactions enjoyed impressive 175.44% (yoy) growth, with QRIS users and merchants totalling 48.12 million and 31.61 million respectively.  On the other hand, the value of card-based payments using ATM/debit cards totalled Rp1,831.77 trillion in the reporting period, retreating 3.80% (yoy), while the value of credit card transactions increased 7.71% (yoy) to reach Rp105.13 trillion.  In terms of Rupiah currency management, total currency in circulation grew 13.15% (yoy) to Rp1,073.57 trillion.  Meanwhile, Bank Indonesia will continue expanding the acceptance of cross-border QRIS payment linkages.

Infrastructure stability and the structure of the payments industry remain solid. In terms of infrastructure, Bank Indonesia maintains a secure, save, and reliable payment system, supported by adequate liquidity and operational functionality.  Regarding the structure of the payments industry, payment system interconnection and the digital economy and finance ecosystem continue to expand.  SNAP-based payment transactions that facilitate interconnection between industry players in the payment system are increasing in response to greater cooperation between existing and new users.  In addition, Bank Indonesia will ensure the availability of Rupiah currency fit for circulation in suitable denominations throughout all regions of the Republic of Indonesia.