TEMPO.CO, Jakarta - The DBS Macroeconomic Research Team stated that Bank Indonesia (BI) needs to maintain its benchmark interest rate or BI-Rate in the first half of 2024.

"BI needs to maintain its benchmark interest rate in the first half of 2024 and explore the possibility of cuts in the second half of 2024," said Senior Economist at DBS Bank, Radhika Rao, in a written statement on Friday, February 9, 2024.

According to Radhika, as Bank Indonesia strengthens its monetary policy efforts, fiscal consolidation also needs to be prioritized.

"The fiscal deficit in 2023 as a percentage of Gross Domestic Product (GDP) is the lowest deficit in over a decade," she said.

Meanwhile, the DBS Macroeconomic Research Team predicts that the fiscal deficit in 2024 will be low, at -1.8 percent of GDP. "This is lower than the budget," she added.

On the other hand, Senior Economist at Bloomberg Southeast Asia, Tamara Henderson, predicted that Bank Indonesia will be the first central bank in the Southeast Asian region to cut its benchmark interest rate.

However, Henderson said that the policy of lowering interest rates will be implemented after the Federal Reserve of the United States, also known as The Fed, lowers its benchmark interest rate or Fed Funds Rate (FFR) first.

"We expect Bank Indonesia to be one of the central banks in this region (Southeast Asia) to cut interest rates, but not before The Fed (the United States central bank)," said Henderson via video broadcast at the Bloomberg Technoz Economic Outlook 2024 event at the Westin Hotel, Jakarta, on Wednesday, February 7, 2024.

According to Henderson, Bank Indonesia is likely to cut interest rates with varying levels and frequencies.

On the other hand, Senior Deputy Governor of Bank Indonesia, Destry Damayanti, said that the BI-Rate could be lowered without waiting for The Fed to lower the FFR first.

"When will BI cut interest rates? Waiting for The Fed to cut interest rates? I answer, not always like that," said Destry during the same occasion.

Destry explained that if the domestic economic conditions are good, then Bank Indonesia can lower interest rates. "If everything domestic is okay, we will lower it, even if The Fed has not yet lowered interest rates," she said.

DEFARA DHANYA PARAMITHA

Click here to get the latest news updates from Tempo in Google News