Gotrade News - Economists predict Bank Indonesia (BI) will maintain its benchmark interest rate at 4.75% at the April 2026 Board of Governors Meeting. External pressures from Middle East conflicts and unstable domestic conditions are the primary considerations.
Key Takeaways:
- BI's benchmark rate is expected to remain at 4.75% with deposit facility at 3.75% and lending facility at 5.5%
- Manufacturing PMI dropped from 53 to approximately 50, nearing the contraction threshold
- Fed Chair nominee Kevin Warsh affirmed the Federal Reserve's independence, rejecting political pressure from Trump
Ryan Kiryanto, senior economist at LPPI, stated external conditions remain unfavorable with elevated global uncertainty. The Middle East conflict is creating negative sentiment for Indonesia's economy overall.
Kiryanto also noted that manufacturing PMI dropped from 53 to approximately 50, approaching the boundary between expansion and contraction. This decline signals an economic slowdown that the central bank needs to anticipate.
Josua Pardede, Permatabank's Chief Economist, emphasized that this week's global market calm is insufficient to shift BI's stance toward rate cuts. Rupiah stability and inflation management remain monetary policy priorities.
The rate hold decision also factors in geopolitical risk and energy price mitigation. Domestic asset attractiveness must be maintained to prevent foreign capital outflows.
On the global front, Fed Chair nominee Kevin Warsh testified before the US Senate Banking Committee on Tuesday (April 21). Warsh repeatedly affirmed his commitment to acting independently if confirmed.
Warsh rejected claims he would serve as a tool for Trump's interest rate preferences. The nominee proposed structural changes to Fed decision-making processes including a new framework for addressing persistent inflation.
Economists agree that BI rate cuts remain unlikely as long as external pressures persist. The rupiah's lack of significant strengthening is an additional factor constraining monetary easing.
Sources: Kumparan, Bloomberg Technoz
