Bank Indonesia Pulls Out All the Stops to Realize Prabowo’s 8% Growth Ambition

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JAKARTA, investortrust.id – Bank Indonesia is ramping up its monetary support to help realize President Prabowo Subianto’s ambitious target of 8% economic growth, even as it maintains a firm grip on inflation and rupiah stability.

Firman Mochtar, Head of the Central Bank’s Monetary Policy Department, said the recent policy shifts—including interest rate cuts and expansive liquidity injections—are part of a broader effort to translate macroeconomic strength into real welfare gains for Indonesians.

“Why do we keep pushing for higher economic growth? Because the aim of our macroeconomic policies is ultimately the welfare of the people,” Firman said at a press briefing at BI headquarters in Jakarta on Thursday, July 24, 2025.

He added that Bank Indonesia sees strong, inclusive growth as the path to prosperity and is confident this can be pursued without sacrificing its twin mandates: maintaining price stability and a resilient currency.

Rupiah Strength and Inflation Under Control

Despite easing its benchmark interest rate by 25 basis points to 5.25% last week, BI remains confident that the rupiah will hold steady. Firman noted the rupiah has rebounded to around Rp 16,200 per dollar from Rp 16,700 earlier this year, thanks to a strengthening balance of payments and renewed inflows of foreign capital.

“Indonesia’s external resilience has improved—our balance of payments is in surplus and capital is flowing in. That’s helping support the rupiah,” he said.

Inflation is also trending lower, giving BI room to maneuver. Consumer Price Index (CPI) inflation stood at 1.8% in June, while core inflation came in at 2.3%, both within BI’s target range.

Monetary and Macroprudential Push

To further stimulate growth, Bank Indonesia has enhanced monetary transmission through a mix of rate cuts and liquidity measures. These include lowering the reverse repo rate (SRBI), stepping up secondary market government bond purchases, and unlocking macroprudential liquidity facilities now totaling Rp 371 trillion ($22.7 billion).

“These steps demonstrate BI’s commitment not just to price and currency stability, but also to ensuring credit reaches the real sector,” Firman explained.

Credit growth stood at 7.77% year-on-year as of May 2025, which BI believes must accelerate to support higher GDP expansion in the second half of the year.

Gubernur Bank Indonesia Perry Warjiyo echoed this view in a virtual press briefing following last week’s policy meeting, stating: “We will continue to optimize our accommodative macroprudential policies—lowering interest rates, improving liquidity flexibility, and boosting financing—to ensure sustainable economic growth.”

BI also cut the deposit facility rate to 4.5% and the lending facility rate to 6%. The rate move surprised markets slightly, with Bloomberg’s pre-announcement poll showing a split consensus: 55% expected no change, while 45% anticipated a 25 bps cut.

A Delicate Balance

Even as it turns on the monetary taps, Bank Indonesia insists it is not abandoning caution. “Our mandate remains the same: controlling inflation and maintaining rupiah stability, all in support of economic growth,” Firman reiterated.

The central bank appears to be betting that Indonesia’s improved macro fundamentals—stable inflation, strong capital inflows, and robust external balances—can provide enough buffer to simultaneously pursue growth and stability.