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Macroeconomic Analysis Series: BI Board of Governors Meeting, May 2025

Author

Listed:
  • Jahen F. Rezki

    (Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI))

  • Teuku Riefky

    (Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI))

  • Faradina Alifia Maizar

  • Difa Fitriani

  • Mervin Goklas Hamonangan

  • Hardy Salim

  • Alif Ihsan A Fahta

    (Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI))

Abstract

Headline inflation rose to 1.95% (y.o.y.) in April 2025, returning to Bank Indonesia’s target range of 1.5–3.5%, up from 1.03% in March. This increase followed the expiry of the 50% electricity tariff discount for households with a power capacity of up to 2,200 VA. Core inflation also accelerated, driven by higher gold and car prices. Despite uncertainty over President Trump's tariff policies, between mid-April and mid-May, Rupiah appreciated by 1.70%, from IDR16,795 to IDR16,510 per US dollar, supported by easing trade tensions and Bank Indonesia’s intervention to stabilise the exchange rate. These actions contributed to a USD4.6 billion decline in foreign exchange reserves, the steepest monthly drop in two years. The recent inflation figure and currency stability suggest some room for monetary easing. However, it remains unclear whether this stability will be sustained. Given lingering external risks, Bank Indonesia should keep BI Rate at 5.75% and remain cautious until global conditions become more predictable.

Suggested Citation

  • Jahen F. Rezki & Teuku Riefky & Faradina Alifia Maizar & Difa Fitriani & Mervin Goklas Hamonangan & Hardy Salim & Alif Ihsan A Fahta, 2025. "Macroeconomic Analysis Series: BI Board of Governors Meeting, May 2025," LPEM FEBUI BI Board of Governor Meeting Brief 202505, LPEM, Faculty of Economics and Business, University of Indonesia, revised May 2025.
    • Handle: RePEc:lpe:gomeet:202505
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    File URL: https://lpem.org/repec/lpe/queouts/BBG202505.pdf
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