On February 19, 2025, Bank Indonesia (BI), through the Board of Governors Meeting (RDG), decided to maintain its benchmark interest rate (BI Rate) at 5.75%. This decision aligns with market expectations and aims to sustain economic stability and the Rupiah exchange rate amid ongoing global uncertainty. However, how does this policy affect the movement of the Jakarta Composite Index (IHSG)?

Reasons Behind Bank Indonesia’s Decision to Maintain the BI Rate

In its official statement, Bank Indonesia outlined several key factors behind its decision to keep the BI Rate at 5.75%, including:

• Controlled Inflation
  
  Bank Indonesia expects inflation to remain within the target range of 2.5±1% for 2025 and 2026, eliminating the need for a change in the current interest rate policy.

• Rupiah Exchange Rate Stability
  
  This policy aims to ensure Rupiah stability amid global uncertainties, including the impact of monetary policies implemented by the U.S. Federal Reserve (The Fed).

• Support for Economic Growth
  
  Besides maintaining macroeconomic stability, Bank Indonesia is also committed to fostering economic growth through an accommodative macroprudential policy.

"This decision is part of a stabilization measure to control inflation, maintain exchange rate stability, and support sustainable economic recovery," said Bank Indonesia Governor Perry Warjiyo, as quoted by Bisnis.com.

Impact on IHSG

Following the policy announcement, IHSG closed lower by 1.14% at 6,794.86 on Wednesday (February 19). Several banking sector stocks also came under pressure as market sentiment remained cautious about persistently high interest rates.

According to a report by Kontan, although BI's decision was in line with expectations, market participants are still awaiting clarity on potential interest rate cuts in the future. "The market had already anticipated this decision, but the unrealized expectations of a rate cut are keeping investors cautious," said Felix Darmawan, an analyst at Panin Sekuritas.

Is This Decision Beneficial for IHSG?

In the short term, this policy tends to have a neutral to negative impact on IHSG, particularly on sectors sensitive to interest rate changes, such as property and banking. However, from a long-term perspective, Bank Indonesia's decision to maintain the BI Rate at 5.75% signals that economic stability remains a top priority. If inflation remains controlled and external pressures subside, there is a possibility that BI will lower interest rates in the future, which could serve as a positive catalyst for the stock market.

This policy provides a signal of stability for Indonesia's financial markets. Although IHSG faced some pressure, long-term investors remain optimistic about potential interest rate cuts ahead. With controlled inflation and a stable Rupiah exchange rate, there is still room for IHSG to rebound if Bank Indonesia starts indicating a more accommodative monetary policy in the coming months.