​The BI Board of Governors Meeting agreed on 20th-21st August 2024 to hold the BI-Rate at 6.25%, while also maintaining the Deposit Facility (DF) rate and Lending Facility (LF) rate at 5.50% and 7.00% respectively. This decision is consistent with the pro-stability focus of monetary policy, to further strengthen the stabilization of the Rupiah exchange rate as well as a pre-emptive and forward-looking measure to ensure inflation within the 2.5%±1% target corridor in 2024 and 2025​. Meanwhile, Bank Indonesia will maintain pro-growth macroprudential and payment system policies to foster sustainable economic growth. Bank Indonesia will hold an accommodative macroprudential policy stance to revive bank lending/financing to businesses and households, while maintaining prudential principles. Payment system policy is directed 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 monetary, macroprudential and payment system policy mix to maintain stability and support sustainable economic growth against a backdrop of persistently elevated global financial market uncertainty through the following measures:

1. Strengthening the pro-market monetary operations strategy to enhance monetary policy effectiveness in terms of Rupiah stabilisation by:
1. Strengthening the interest rate structure of the Rupiah money market to maintain attractive yields and increase portfolio inflows to domestic financial assets for investment. 
2. Optimising Bank Indonesia Rupiah Securities (SRBI), Bank Indonesia Foreign Exchange Securities (SVBI) and Bank Indonesia Foreign Exchange Sukuk (SUVBI).
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 prime lending rate (PLR) transparency policy with a focus on interest rates by priority economic sector based on Macroprudential Liquidity Incentive policy (KLM) (Appendix).
5. Implementing the Indonesia Payment System Blueprint (BSPI) 2030, which is focused on aspects of infrastructure development and industry structure consolidation.
6. Increasing acceptance of digital payment services by expanding Quick Response Code Indonesia Standard (QRIS) and the Indonesia Credit Card (KKI) for the government segment.
7. Expanding international financial cooperation and central bank cooperation, including structured bilateral cooperation, while promoting trade and investment in priority sectors in synergy with relevant institutions.
   

Policy coordination between Bank Indonesia and the Government is also constantly strengthened to mitigate the risks posed by persistently high global uncertainty. Policy coordination with the (central and regional) Government is constantly strengthened 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 also strengthened to maintain macroeconomic stability and bolster 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 bank lending/financing to businesses.

Global financial market uncertainty has shown early signs of easing yet the risks remain high. Global economic growth in 2024 is forecast at 3.2%, with a moderating trend. Economic growth in the United States (US) is forecast to begin slowing in the second semester of 2024 in response to weaker domestic demand. On the other hand, China's economy remains sluggish and Europe is experiencing economic improvements. Moderation in the US has heightened unemployment and accelerated the disinflation process towards the long-term inflation target of 2%. This has stoked expectations of earlier and larger Federal Funds Rate (FFR) reductions than previously forecast. Furthermore, such developments have lowered US Treasury yields for 2-year tenors, accompanied by a lower yield on the benchmark 10-year tenor and broad-based US dollar depreciation against various global currencies. Global financial market uncertainty has also begun to lessen, prompting an influx of foreign capital inflows and strengthening currencies in emerging market economies (EMEs), including Indonesia. Moving forward, risks relating to concerns of a possible recession in the US and geopolitical dynamics will demand vigilance. This will necessitate caution when formulating an optimal policy response to potential spillovers from global uncertainty on the domestic economy.

At home, economic growth in Indonesia remains solid, underpinned by domestic demand and exports. Economic growth in the second quarter of 2024 was recorded at 5.05% (yoy), primarily supported by household consumption and investment. Exports increased on higher demand in key trading partners, coupled with higher services exports. By sector, economic growth was primarily driven by the manufacturing industry, construction, as well as wholesale and retail trade. Spatially, economic growth accelerated in most regions of the Indonesian archipelago, led by Bali-Nusa Tenggara (Balinusra) and Sulawesi-Maluku-Papua (Sulampua). Moving forward, efforts to support economic growth must be sustained to maintain confidence in the promising national economic outlook. Household consumption needs to be increased given fading seasonal factors relating to the national religious holidays and General Election in the first semester of 2024. Ongoing national strategic projectsxpected to boost investment, particularly private investment. A bump in fiscal stimuli from 2.3% to 2.7% of GDP in 2024 is also expected to provide a significant multiplier effect on the economy. Consequently, Bank Indonesia projects economic growth in 2024 in the 4.7-5.5% range. Additionally, Bank Indonesia will continue strengthening synergy between macroprudential policy and the fiscal stimuli implemented by the Government in pursuit of sustainable economic growth, particularly from the demand side.

Indonesia's Balance of Payments (BOP) remains sound, thereby supporting external resilience. The current account deficit in the second quarter of 2024 is projected to remain narrow given a wider surplus recorded in the trade balance. Meanwhile, the capital and financial account is projected to maintain a surplus despite high global financial market uncertainty. Positive BOP performance is expected to persist in the third quarter of 2024. In July 2024, the trade balance amassed a USD0.5 billion surplus. Portfolio investment has also strengthened, attracted to various domestic financial assets for investment, including government securities (SBN), Bank Indonesia Rupiah Securities (SRBI) and shares, recording a net inflow totalling USD7.2 billion as of 19th August 2024 (qtd). The position of foreign reserves at the end of July 2024 increased to USD145.4 billion, equivalent to 6.5 months of imports or 6.3 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, underscored by a low and manageable current account deficit in the 0.1%-0.9% of GDP range. On the other hand, the capital and financial account is expected to maintain a surplus given increasing portfolio investment and foreign direct investment (FDI) in line with positive investor perception concerning the promising domestic economic outlook and attractive yields on financial assets for investment.

The Rupiah continues tracking an appreciatory trend in response to the monetary policy mix instituted by Bank Indonesia, an influx of foreign capital inflows and early signs that global financial market uncertainty is subsiding. The Rupiah in August 2024 (as of 20th August 2024) appreciated to reach Rp15,430/USD, improving 5.34% on the position recorded at the end of July 2024. Rupiah appreciation has outperformed other regional currencies, including the Thai baht, Japanese yen, Philippine peso and South Korean won, which appreciated by 4.22%, 3.25%, 3.20% and 3.04%, respectively. Compared with the level recorded at the end of December 2023, therefore, rupiah depreciation has been less severe than the depreciation experienced by the Indian rupee, Philippine peso and South Korean won. Moving forward, the Rupiah exchange rate is projected to continue strengthening in line with attractive yields, low inflation and solid economic growth in Indonesia, as well as Bank Indonesia's firm policy commitments. Furthermore, Bank Indonesia continues optimising the full panoply of monetary instruments available, which includes strengthening its pro-market monetary operations strategy through the SRBI, SVBI and SUVBI instruments.

Inflation is falling and remains within the 2.5%±1% target corridor. Consumer Price Index (CPI) inflation in July 2024 was recorded at 2.13% (yoy), down from 2.51% in June 2024. Lower headline inflation was influenced by all components. Core inflation was recorded low at 1.95% (yoy), while volatile food (VF) inflation continued falling to 3.63% (yoy) from 5.96% (yoy) the month earlier. Lower VF inflation was recorded in most Indonesian regions in response to increasing food supply during the ongoing harvesting season, coupled with the positive impact of close synergy to manage inflation between the TPIP/TPID teams through the GNPIP movement. Moving forward, Bank Indonesia is confident that CPI inflation will remain under control and within the target corridor. Core inflation is projected to remain under control in line with anchored inflation expectations, massive economic capacity in response to domestic demand, low imported inflation in line with Rupiah stability by Bank Indonesia, as well as the positive impact of digitalisation. Bank Indonesia also expects VF inflation to remain manageable, underpinned by inflation control synergy between Bank Indonesia and the (central and regional) Government. Furthermore, Bank Indonesia will continue strengthening its pro-stability monetary policy stance and bolstering policy synergy with the Government to maintain inflation in 2024 and 2025 within the 2.5%±1% target range.

Bank Indonesia continues optimising various pro-market monetary instruments, namely SRBI, SVBI and SUVBI, to strengthen Rupiah stability and achieve the inflation target. This policy also aims to accelerate money market deepening efforts and attract foreign capital inflows. As of 19th August 2024, the respective positions of SRBI, SVBI and SUVBI instruments stood at Rp899.50 trillion, USD1.73 billion and USD168 million. SRBI issuances have attracted portfolio inflows to Indonesia, as reflected by significant non-resident holdings of SRBI totalling Rp243.27 trillion (27.04% of total outstanding). The implementation of Primary Dealers (PD) since May 2024 has also strengthened SRBI effectiveness as a monetary instrument that supports Rupiah stability and inflation control. Moving forward, Bank Indonesia will continue optimising its various innovative pro-market instruments in terms of volume and attractive yields, strengthened by solid economic fundamentals, in pursuit of further portfolio inflows to domestic financial markets.

Monetary policy transmission remains effective. The IndONIA money market reference rate is still moving within the BI-Rate range, recorded at 6.39% on 20th August 2024. SRBI rates remain attractive at 7.05%, 7.14% and 7.20% for tenors of 6, 9 and 12 months, respectively, as of 16th August 2024. SBN yields on tenors of 2 and 10 years decreased to 6.43% and 6.44%, respectively, as of 20th August 2024, triggered by increasing demand from non-residents in line with a surge of foreign capital inflows to the SBN market. Liquidity in the banking industry remains ample in line with implementation of the Bank Indonesia policy mix, including Macroprudential Liquidity Incentives (MLI). Adequate liquidity and pricing efficiency in the banking industry are consistent with PLR transparency policy, which has had a positive impact on competitive interest rates in the banking industry. The 1-month term deposit rate and lending rate were also relatively stable in July 2024 at 4.73% and 9.23%, respectively.

Credit growth remained high in July 2024, reaching 12.40% (yoy). On the supply side, bank lending appetite was maintained in line with strong third-party funds (TPF) growth at 7.72% (yoy) recorded in July 2024 and the ongoing bank strategy to reallocate liquid assets to credit, accompanied by policy support from Bank Indonesia in the form of Macroprudential Liquidity Incentive (MLI) policy. Strengthening funding, the banking industry also optimised its sources of non-TPF funding, which includes issuing securities and extending loans. On the demand side, loan growth is supported by corporate demand in line with persistently high sales performance. Meanwhile, household demand for loans remains strong, particularly for housing loans. Credit growth remains high in most economic sectors, particularly Industry, Electricity, Gas and Water as well as Transportation. By loan type, credit growth is primarily supported by investment loans, working capital loans and consumer loans, growing 15.20% (yoy), 11.60% (yoy) and 10.98% (yoy), respectively, in July 2024. Furthermore, sharia financing recorded 11.75% (yoy) growth, while MSME loans increased 5.16% (yoy) in the reporting period. Consequently, Bank Indonesia projects credit growth to increase towards the upper bound of the 10-12% range in 2024.

Financial system resilience remains solid. Bank liquidity remained adequate in July 2024, as reflected by a high ratio of liquid assets to third-party funds (LA/TPF) at 25.56%. The Capital Adequacy Ratio (CAR) remained high at 26.09%, thereby absorbing risk and supporting credit growth effectively. Meanwhile, non-performing loans (NPL), as a proxy of credit risk, were also low in June 2024, as indicated by NPL ratios of 2.26% (gross) and 0.78% (nett). Banking industry resilience in terms of capital and liquidity was also supported by maintained repayment capacity and corporate profitability, as confirmed by the latest BI stress tests. Moving forward, Bank Indonesia will continue strengthening synergy with KSSK to mitigate various risks that could potentially disrupt financial system stability.

Digital economic and financial transactions remained solid in July 2024, supported by secure, seamless and reliable payment systems. On the wholesale or high-value side, BI-RTGS transactions increased 15.36% (yoy) to reach Rp15,450 trillion. On the other hand, the volume of retail transactions processed through BI-FAST increased 65.08% (yoy) to 301.41 million transactions. The volume of digital banking transactions was recorded at 1,845.27 million, growing 30.50% (yoy), while the volume of electronic money transactions grew 22.61% (yoy) to reach 1,272.35 million. The volume of card-based payments using ATM/debit cards retreated 9.57% (yoy) to 584.95 million transactions and credit card transactions increased 15.35% (yoy) to reach 39.83 million. QRIS transactions enjoyed impressive 207.55% (yoy) growth, with QRIS users and merchants totalling 51.43 million and 33.21 million, respectively. In terms of Rupiah currency management, total currency in circulation grew 9.45% (yoy) to Rp1,041.02 trillion.

Payment system infrastructure stability has been maintained, supported by broader interconnection in the payment system industry. In terms of infrastructure, Bank Indonesia maintains a secure, seamless 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. Payment transactions based on the National Open API Payment Standard (SNAP), which facilitates interconnection in the payment system, continue to grow as cooperation between industry players expands. In addition, Bank Indonesia will ensure adequate availability of Rupiah currency fit for circulation in suitable denominations throughout all regions of the Republic of Indonesia, including frontier, outermost and remote regions.