No. 26/254/DKom 

The BI Board of Governors Meeting agreed on 19-20^th November 2024 to hold the BI-Rate at 6.00%, while also maintaining the Deposit Facility (DF) rate and Lending Facility (LF) rate at 5.25% and 6.75%, respectively. The decision is consistent with the direction of monetary policy to control inflation in 2024 and 2025 within the 2.5 ±1% target corridor, while supporting sustainable economic growth. The focus of monetary policy is on Rupiah stability in response to increasing geopolitical and global economic uncertainty given the political developments underway in the United States (US). Moving forward, Bank Indonesia will remain vigilant of Rupiah exchange rate movements and the inflation outlook as well as data developments and emerging dynamic conditions when considering further room for monetary easing. Bank Indonesia maintains 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 priority sectors and create job opportunities, including the MSME sector and green economy, while maintaining prudential principles. Payment system policy is directed towards bolstering growth, particularly in the trade and MSME sectors, strengthening 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 mainta​in stability and support sustainable economic growth through the following measures:

1. Strengthening the pro-market monetary operations (MO) strategy to maintain foreign capital inflows to enhance monetary policy effectiveness in terms of Rupiah stabilisation by:
1. optimising Bank Indonesia Rupiah Securities (SRBI), Bank Indonesia Foreign Exchange Securities (SVBI) and Bank Indonesia Foreign Exchange Sukuk (SUVBI) as pro-market instruments,
2. strengthening the interest rate structure of monetary instruments to attract portfolio inflows to domestic financial assets,
3. strengthening strategies to maintain competitive term-repo and forex swap transactions, and
4. strengthening the function of Primary Dealers (PD) to increase SRBI transactions in the secondary market and repurchase agreement (repo) transactions between market players.
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 prime lending rate (PLR) transparency policy with a focus on interest rates by Macroprudential Liquidity Incentive policy (KLM) priority sectors (Appendix).
4. Extending the current fees for the National Clearing System (SKNBI) and credit card policy until 30^st June 2​025 as follows:
1. National Clearing System fees of Rp1 for banks and up to Rp2,900 for bank customers, and
2. Minimum payment policy for credit cardholders of 5% of the outstanding balance and late payment penalties of 1% of the outstanding balance up to a maximum of Rp100,000.
5. Strengthening the literacy and education of QRIS users and merchants, particularly at the main travel destinations for tourists, to strengthen the acceptance of cross-border QRIS payments.

Policy coordination between Bank Indonesia and the Government is also constantly strengthened to maintain stability and strengthen economic growth. Policy coordination with the (central and regional) Government is instituted 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. Bank Indonesia is also strengthening and expanding international cooperation among central banks, including through payment system connectivity and local currency transactions (LCT), as well as promoting investment and trade in priority sectors in synergy with relevant institutions.

Global economic risks are increasing, accompanied by a deepening of geopolitical tensions and trade fragmentation. Political developments in the US are expected to be followed by expansionary fiscal policy and inward-looking policies, which includes the introduction of higher trade barriers and stringent immigration policies. This could potentially undermine economic growth and edge up global inflation again. In the US, the disinflation process will be prolonged, with more limited reductions expected in the Federal Funds Rate (FFR). Meanwhile, the more pressing need to finance the fiscal deficit will increase US Treasury yields again for short and long tenors. Political change in the US has already led to broad-based US dollar appreciation and a rebalancing of global investment, with portfolio allocations returning to the US. Consequently, this has triggered a build-up of currency pressures around the world along with portfolio outflows, including from emerging market economies (EMEs). A strong policy response is required, therefore, to bolster external resilience against the adverse impacts of global spillovers on EMEs, including Indonesia.

At home, economic growth in Indonesia remains solid. Economic growth in the third quarter of 2024 was recorded at 4.95% (yoy), underpinned by household consumption, particularly among the upper-middle class, as well as investment due to the ongoing development of national strategic projects. Non-oil and gas exports increased on the back of positive demand growth in Indonesia's main trading partners. In the fourth quarter of 2024, economic growth is projected to remain solid, supported by government consumption given greater spending towards the end of the year. Household consumption is expected to continue growing in line with a maintained Consumer Confidence Index (CCI) and the positive impact of local elections in various regions. Investment is also expected to persist, supported by venture capital spending as well as production and order volume, as reflected in the Prompt Manufacturing Index – Bank Indonesia (PMI-BI). Overall, Bank Indonesia projects economic growth in 2024 in the 4.7-5.5% range before accelerating in 2025. Seeking to drive higher economic growth, the structural reform policy of the Government must be strengthened, particularly in sectors that support economic growth and labour absorption, while increasing labour productivity. Bank Indonesia will continue strengthening its pro-growth policy mix in close synergy with the fiscal stimulus policy of the Government, particularly by optimising macroprudential policy stimuli and accelerating payment system digitalization.

Indonesia's Balance of Payments (BOP) remains sound, thereby supporting external stability. The BOP in the third quarter of 2024 recorded a surplus, supported by a narrow current account (CA) deficit given the positive trade balance and wider capital and financial account surplus. The latest fourth-quarter developments indicate that the trade surplus was maintained in October 2024 at USD2.5 billion, driven by higher non-oil and gas exports. Nevertheless, a resurgence of global financial market uncertainty prompted portfolio investment outflows in November 2024 (as of 18^th November 2024), recording a net outflow totalling USD1.9 billion after posting a net inflow of USD1.1 billion in October 2024. The position of foreign reserves at the end of October 2024 stood at USD151.2 billion, equivalent to 6.6 months of imports or 6.4 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 expected to remain solid in line with the maintained capital and financial account surplus and supported by foreign capital inflows and a manageable current account deficit in the 0.1-0.9% of GDP range. In 2025, BOP performance is expected to remain solid given foreign capital inflows and a manageable current account deficit.

Bank Indonesia exchange rate policy remains oriented towards maintaining Rupiah stability against the impact of broad-based US dollar appreciation. The Rupiah in November 2024 (as of 19^th November 2024) depreciated 0.84% (ptp) on the previous month, primarily due to broad-based US dollar appreciation and a rebalancing of global investment, with portfolio allocations returning to the US after the results of the US presidential election were announced. In general, however, Rupiah depreciation remains manageable. Compared to the level recorded at the end of December 2023, the Rupiah has only depreciated by 2.74%, compared with 5.26%, 5.83% and 7.53% for the Taiwan dollar, Philippine peso and Korean won, respectively. Moving forward, the Rupiah exchange rate is projected to remain stable in line with attractive yields, low inflation and the promising economic growth outlook for Indonesia, as well as Bank Indonesia's firm policy commitment to maintain economic stability. 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 to boost policy effectiveness in terms of attracting foreign capital inflows and supporting efforts to strengthen the Rupiah exchange rate.

Consumer Price Index (CPI) inflation in October 2024 was maintained within the 2.5±1% target corridor.  Consumer Price Index (CPI) inflation was recorded in October 2024 at 1.71% (yoy), influenced by core inflation that remained under control at a level of 2.21% (yoy) and volatile food (VF) inflation that fell to 0.89% (yoy). Lower volatile food inflation was supported by increasing food supply during the ongoing harvesting season, close synergy to manage inflation between the TPIP/TPID teams through the GNPIP movement, and the base effect of food prices. Spatially, CPI inflation in most regions was maintained within the national inflation target. Moving forward, Bank Indonesia is confident that CPI inflation will remain under control and within the target corridor. Core inflation is projected to remain manageable in line with anchored inflation expectations, massive economic capacity in response to domestic demand, maintained imported inflation in line with Rupiah stability by Bank Indonesia, as well as the positive impact of digitalisation. Bank Indonesia also expects volatile food inflation to remain manageable, underpinned by inflation control synergy between Bank Indonesia and the (central and regional) Government. Furthermore, Bank Indonesia remains fully committed to strengthening monetary policy effectiveness in order to maintain inflation in 2024 and 2025 within the 2.5±1 % target range, while continuing to support efforts to strengthen economic growth.

Bank Indonesia continues optimising various pro-market monetary instruments 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 18^th November 2024, the respective positions of SRBI, SVBI and SUVBI instruments stood at Rp968.82 trillion, USD3.39 billion and USD387 million. SRBI issuances have attracted portfolio inflows to Indonesia and strengthened the Rupiah, as reflected by significant non-resident holdings of SRBI totalling Rp250.18 trillion (25.8% of total outstanding). The implementation of Primary Dealers (PD) since May 2024 has also increased SRBI transactions in the secondary market along with repurchase agreement (repo) transactions between market players, thereby strengthening the effectiveness of monetary instruments that support 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 6.20% on 19^th November 2024. SRBI rates remain attractive at 6.79%, 6.85% and 7.07% for tenors of 6, 9 and 12 months, respectively, as of 19^th November 2024. SBN yields on tenors of 2 and 10 years increased to 6.44% and 6.86% in line with rising UST yields. Meanwhile, liquidity in the banking industry remains ample as a corollary of the Bank Indonesia policy mix, including KLM. 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 October 2024 at 4.73% and 9.17%, respectively, down slightly on the previous month.

Credit growth remained high in October 2024, reaching 10.92% (yoy). On the supply side, solid credit growth was supported by bank lending appetite, the current bank strategy to reallocate liquid assets to credit and deposit growth, as well as policy support from Bank Indonesia in the form of KLM policy. At the end of October 2024, Bank Indonesia had disbursed KLM incentives totalling Rp259 trillion, including to state-owned banks (Rp120.9 trillion), national private commercial banks (Rp110.9 trillion), regional government banks (Rp24.7 trillion) and foreign bank branches (Rp2.6 trillion). The KLM incentives are disbursed to banks extending loans/financing to priority sectors, namely Downstream Mineral and Coal Mining and Food sectors, the Automotive sector, Trade, Electricity, Gas and Water Supply, Tourism and the Creative Economy and MSMEs. On the demand side, loan growth is supported by robust corporate performance in line with projections of persistently solid economic growth. Credit growth remains high in most economic sectors, particularly the Corporate Services sector, Trade and Manufacturing Industry. By loan type, credit growth is primarily supported by working capital loans, investment loans and consumer loans, growing 9.25% (yoy), 13.63% (yoy) and 11.01% (yoy), respectively, in October 2024. Furthermore, sharia financing recorded 11.93% (yoy) growth, while MSME loan growth stood at 4.76% (yoy) in the reporting period. Consequently, Bank Indonesia still projects credit growth in the 10-12% range in 2024 before accelerating in 2025.

Financial system resilience remains solid, including the banking industry. Bank liquidity remained adequate in October 2024, as reflected by a high ratio of liquid assets to third-party funds (LA/TPF) at 25.58%. The Capital Adequacy Ratio (CAR) also remained high in September 2024 at 26.78%, thereby absorbing risk and supporting credit growth effectively. Meanwhile, non-performing loans (NPL), as a proxy of credit risk, were also low in September 2024, as indicated by NPL ratios of 2.21% (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 Committee to mitigate various risks that could potentially disrupt financial system stability.

Digital economic and financial transactions remained solid in October 2024, supported by secure, seamless and reliable payment systems. On the wholesale or high-value side, BI-RTGS transactions increased 21.13% (yoy) to reach a value of Rp16,682.58 trillion. On the other hand, the volume of retail transactions processed through BI-FAST increased 59.3% (yoy) to 339 million transactions. The volume of digital banking transactions was recorded at 1,960.8 million, growing 37.1% (yoy), while the volume of electronic money transactions grew 27.0% (yoy) to reach 1,365.4 million. The volume of card-based payments using ATM/debit cards retreated 11.4% (yoy) in October 2024 to 558.8 million transactions and credit card transactions increased 19.6% (yoy) to reach 39.7 million transactions. QRIS transactions enjoyed impressive 183.9% (yoy) growth in the reporting period, with QRIS users and merchants totalling 54.1 million and 34.7 million, respectively. In terms of rupiah currency management, total currency in circulation grew 11.8% (yoy) to Rp1,070.6 trillion.

Payment system stability has been maintained, supported by a sound structure and stable infrastructure. In terms of the infrastructure, Bank Indonesia maintains a seamless and reliable payment system (SPBI). 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) continue to grow as SNAP adoption among various industry players expands. Meanwhile, Bank Indonesia will continue ensuring adequate availability of Rupiah currency fit for circulation in suitable denominations throughout all regions of the Republic of Indonesia, particularly during the Christmas and New Year festive period.

Jakarta, 20^th November 2024

Communication Department

Ramdan Denny Prakoso

Executive Director