Indonesia experienced a 0.09% (y.o.y) deflation in February 2025, falling below Bank Indonesia’s target range of 1.5%–3.5%, primarily due to electricity tariff adjustments. Core inflation remained stable, indicating that the decline was not driven by weakening demand. Inflationary pressures are expected to rise in the coming months as demand increases during Ramadan and the expiration of electricity subsidies takes effect. Meanwhile, the Federal Reserve is expected to keep the Fed Funds Rate unchanged at 4.25%–4.50% in its upcoming March meeting, as inflation in the United States remains above target despite signs of moderation. Rising trade uncertainties under President Trump, including escalating tariff disputes
with the European Union and North American trading partners, could sustain inflationary pressures and weigh on business sentiment. While inflation is currently below target, it is expected to return to Bank Indonesia’s target range in the coming months. At the same time, external risks from global financial market volatility and US trade policies remain elevated. Considering these factors, Bank Indonesia should maintain its policy rate at 5.75% to ensure Rupiah stability and safeguard financial market resilience.
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