No. 26/275/DKom 

The BI Board of Governors Meeting agreed on 17-18^th December 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 strengthening Rupiah stability in response to heightened global economic uncertainty caused by the policy direction of the United States (US) and escalating geopolitical tensions in various regions. Moving forward, Bank Indonesia will remain vigilant of Rupiah exchange rate movements and the inflation outlook as well as emerging dynamic economic conditions when considering further room for monetary easing. Meanwhile, 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, by strengthening the Macroprudential Liquidity Incentive (KLM) policy strategy, set to commence in January 2025, while maintaining prudential principles. Payment system policy is directed towards bolstering growth, particularly in the trade and MSME sector, 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 maintain stability and support sustainable economic growth through the following measures:

1. Strengthening the pro-market monetary operations strategy to enhance monetary policy effectiveness, accelerate money market and foreign exchange market deepening and attract foreign capital inflows 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 KLM policy priority sectors (Appendix).
4. Expanding BI-FAST services to include bulk transfers, requests for payment and direct debit, thereby fulfilling the needs of the public in terms of fast, convenient, affordable, secure and reliable economic and financial transactions, commencing December 21^st 2024.
5. Strengthening strategies to maintain the availability of a seamless payment system in all regions of the Republic of Indonesia, thereby fulfilling the needs of the public during the Christmas and New Year festive period, which includes the SERUNAI program from December 15-20^th 2024.

Policy coordination between Bank Indonesia and the Government is also constantly strengthened to maintain stability and enhance economic growth. Monetary and fiscal policy coordination is also strengthened to preserve macroeconomic stability and spur 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. 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). 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 financial market uncertainty is increasing, accompanied by the risk of world economic moderation. The restrictive inward-looking trade policies proposed by the US, through higher import tariffs as well as expanding the scope of commodities and countries, have heightened the risk of greater world trade fragmentation. This has also been accompanied by a deepening of geopolitical tensions in various regions, with global economic growth in 2025 thus projected to moderate to 3.1% from 3.2% in 2024. Global inflation has increased compared with the previous forecast due to supply chain disruptions. In the US, Federal Funds Rate (FFR) reductions are expected to be delayed by high inflation. Meanwhile, expansionary fiscal policy is maintaining high US Treasury yields for both short- and long-term tenors. Board-based US dollar appreciation continues, accompanied by 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 and reduced foreign capital inflows to emerging market economies (EMEs). Global economic developments and persistently high global financial market uncertainty require a strong policy response, therefore, to mitigate the adverse impacts of global spillovers on EMEs, including Indonesia. 

Indonesia's domestic economy remains solid on the back of domestic demand. Positive investment growth is projected in the fourth quarter of 2024, underpinned by the completion of various national strategic projects (PSN) and private investment in response to government incentive support. Household consumption is projected to maintain growth, supported by solid consumer confidence and the positive impact of local elections contested in various regions. Government consumption is increasing in line with higher spending activity towards the end of the year. Meanwhile, non-oil and gas exports are expected to moderate as a corollary of the sluggish global economy. By sector, growth is primarily supported by the manufacturing industry, construction, as well as wholesale and retail trade. Overall, economic growth in 2024 is projected in the 4.7-5.5% range, before accelerating to 4.8-5.6% in 2025. Moving forward, various efforts are required to bolster economic growth on the demand and supply sides. Bank Indonesia, therefore, is strengthening its policy mix to stimulate economic growth in close synergy with the fiscal stimuli implemented by the Government. Such efforts are also supported by optimising macroprudential policy stimuli and accelerating payment system digitalisation. On the supply side, structural reform policy by the Government must be strengthened to nurture labour-intensive economic sectors. 

Indonesia's Balance of Payments (BOP) remains sound, thereby supporting external stability. The BOP surplus in November 2024 was recorded at USD 4.4 billion, supported by Indonesia's main export commodities, such as iron and steel as well as fixed vegetable oils and fats. Despite higher global financial market uncertainty, foreign capital inflows to government securities (SBN) recorded a net inflow totalling USD0.7 billion in December 2024 (as of 16^th December 2024) after recording a net outflow of USD0.8 billion in November 2024. Meanwhile, the position of foreign reserves at the end of November 2024 was recorded higher at USD150.2 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 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 projected to remain solid given foreign capital inflows and a manageable current account deficit in the 0.5-1.3% of GDP range. 

Bank Indonesia exchange rate policy remains oriented towards maintaining Rupiah stability against the impact of elevated global uncertainty. The Rupiah in December 2024 (as of 17^th December 2024) depreciated 1.37% (ptp) on the previous month in response to higher global uncertainty, particularly concerning the direction of US policy, less room for further FFR reductions, the strong US Dollar and escalating geopolitical risk, which is causing a rebalancing of global investment, with portfolio allocations returning to the US. In general, however, Rupiah depreciation remains manageable. When compared to the level recorded at the end of December 2023, the Rupiah has depreciated by just 4.16%, which is less severe than the Taiwan Dollar, Philippine Peso and Korean Won at 5.58%, 5.94% and 10.47%, respectively. Moving forward, the Rupiah exchange rate is projected to remain stable in line with Bank Indonesia's firm policy commitment to maintain Rupiah stability, attractive yields, low inflation and a promising economic growth outlook for Indonesia. 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 November 2024 was maintained at 1.55% (yoy). This was influenced by core inflation, which was managed at a rate of 2.26% (yoy) in line with policy consistency by Bank Indonesia to anchor inflation expectations. Meanwhile, volatile food (VF) recorded 0.32% (yoy) deflation in the reporting period, supported by increasing food supply during the 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, managed 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 and foreign exchange market deepening efforts and attract foreign capital inflows. As of 16^th December 2024, the respective positions of SRBI, SVBI and SUVBI instruments stood at Rp940.67 trillion, USD2.08 billion and USD386 million. SRBI issuances have attracted portfolio inflows to Indonesia and strengthened the Rupiah, as reflected by significant non-resident holdings of SRBI totalling Rp233.85 trillion (24.86% 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, to enhance the effectiveness of monetary policy transmission, accelerate money market and foreign exchange market deepening and attract foreign capital inflows. 

Monetary policy transmission remains effective. The IndONIA money market reference rate is still moving within the BI-Rate range, recorded at 6.13% on 17^th December 2024. SRBI rates remain attractive at 7.14%, 7.17% and 7.24% for tenors of 6, 9 and 12 months, respectively. As of 17^th December 2024, SBN yields on tenors of 2 and 10 years increased to 6.87% and 7.04% in line with rising UST yields on the benchmark 10-year tenor. 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 maintaining competitive interest rates in the banking industry. The 1-month term deposit rate and lending rate were also relatively stable in November 2024 at 4.71% and 9.22%, respectively.

Credit growth remained high in November 2024, reaching 10.79% (yoy). On the supply side, solid credit growth was supported by bank lending appetite, the current bank strategy to reallocate liquid assets to credit growth, massive funding support from deposit growth as well as the positive impact of KLM policy targeting 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, MSME sector and the green economy. On the demand side, loan growth is supported by robust corporate performance, including export-oriented companies. By loan type, credit growth is primarily supported by working capital loans, investment loans and consumer loans, growing 8.92% (yoy), 13.77% (yoy) and 10.94% (yoy), respectively, in November 2024. Furthermore, sharia financing recorded 11.24% (yoy) growth, while MSME loan growth stood at 4.02% (yoy) in the reporting period. Consequently, Bank Indonesia still projects credit growth in the 10-12% range in 2024 before accelerating in 2025 to 11-13%. Bank Indonesia continues reviving credit growth, which includes strengthening the KLM strategy, commencing in January 2025, which will be oriented towards stimulating bank lending/financing to support growth and job creation.

Financial system resilience remains solid, including in the banking industry. Bank liquidity remained adequate in November 2024, as reflected by a high ratio of liquid assets to third-party funds (LA/TPF) at 25.57%. The Capital Adequacy Ratio (CAR) also remained high in October 2024 at 27.02%, thereby absorbing risk and supporting credit growth effectively. Meanwhile, non-performing loans (NPL), as a proxy of credit risk, were also low in October 2024, as indicated by NPL ratios of 2.20% (gross) and 0.77% (nett). Banking industry resilience in terms of capital and liquidity was also supported by solid profitability and sound risk management, along with maintained repayment capacity and corporate profitability, as confirmed by the latest BI stress tests. Moving forward, Bank Indonesia will continue strengthening synergy with the KSSK Committee to maintain financial system stability, which includes mitigating various risks that could potentially disrupt financial system stability.

Digital economic and financial transactions remained solid in November 2024, supported by secure, seamless and reliable payment systems. On the wholesale or high-value side, BI-RTGS transactions increased 9.82% (yoy) to reach a value of Rp14,969.37 trillion in November 2024. On the other hand, the volume of retail transactions processed through BI-FAST increased 69.9% (yoy) to 338.61 million transactions in the reporting period. Digital payments continue to accelerate. The volume of digital banking transactions was recorded at 2.04 billion, growing 40.1% (yoy), while the volume of electronic money transactions grew 33.4% (yoy) to reach 1.44 billion. QRIS transactions enjoyed impressive 186% (yoy) growth in the reporting period to 689.07 million transactions, with QRIS users and merchants totalling 55.02 million and 35.1 million, respectively. Meanwhile, the volume of card-based payments using ATM/debit cards retreated 10.9% (yoy) in November 2024 to 562.75 million transactions and credit card transactions increased 21.1% (yoy) to reach 41.15 million transactions. In terms of Rupiah currency management, total currency in circulation grew 11.9% (yoy) to Rp1,105.8 trillion at the end of November 2024.

Payment system stability has been maintained, supported by a sound industry structure and stable infrastructure. In terms of the infrastructure, payment system stability is reflected in the seamless and reliable payment system (SPBI) maintained by Bank Indonesia, along with an adequate money supply of currency fit for circulation in November 2024. 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. Bank Indonesia will also intensify education and socialisation activities concerning the use of cross-border QRIS payments at tourism destinations during the Christmas and New Year festive period. 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, 18^th December 2024

Communication Department

Ramdan Denny Prakoso

Executive Director