The Fed hold the interest rate at 4.25%-4.50% during the Federal Open Market Committee (FOMC) meeting on June 18, 2025, for the fourth consecutive time. The Fed Committee also projected the latest economic indicators, showing weaker growth for both the US and globally, with higher unemployment and inflation rates in 2025, in line with the high reciprocal tariff policies implemented by US President Donald Trump.

Bank Indonesia Board of Governors Meeting (RDG BI) maintained the interest rate at 5.5%, with a Deposit Facility Rate of 4.75% and a Lending Facility Rate of 6.25% on June 18, 2025. This decision aligns with the controlled inflation target range of 2.5±1% for 2025 and 2026. Additionally, BI focuses on maintaining Rupiah exchange rate stability in line with fundamental values while promoting sustainable economic growth amid global and domestic economic dynamics. Furthermore, BI optimizes Macroprudential Liquidity Policy (KLM) to enhance credit growth financing in the MSME sector and promote flexibility in banking liquidity management. BI's strategy to drive economic growth includes strengthening the rupiah exchange rate strategy through open market operations in Domestic Non-Deliverable Forward (DNDF) in foreign markets, spot purchases in domestic markets, and Government Securities (SBN) purchases in the secondary market to maintain financial market stability and adequate banking liquidity, strengthening pro-market monetary operations to support interest rate reduction and accelerate money market and foreign exchange transactions, as well as encouraging foreign capital inflows by maintaining attractive yields on foreign portfolio investments in domestic financial assets and strengthening SRBI auction strategies and large-scale SBN purchases to support money market liquidity.

The Consumer Confidence Index (CCI) decreased by 4.2 points to 117.5 in May 2025 from 121.7 in April 2025. This decline was due to reductions in both the Current Economic Condition Index (CECI) and Consumer Expectation Index (CEI), which fell by 7.7 points to 106 and 0.8 points to 129, respectively, in May 2025 (Figure 1). All CECI sub-indices declined, with the Durable Goods Purchase Index showing the most significant decrease of 9.8 points to 104.1 in April 2025. Additionally, the Employment Availability Index entered a pessimistic phase, falling below 100 points to 95.7, as the public perceived widespread layoffs by Indonesian companies due to increased global economic uncertainty.

United States (U.S.) inflation decreased 0.1% MoM in May 2025 from 0.2% MoM in April 2025, below market expectations of 0.2% MoM. It was influenced by a 1.0% MoM decline in the energy index in May, which included decreases in the fuel and energy commodity indices of 2.6% MoM and 2.4% MoM, respectively. Meanwhile, the food index rose to 0.3% MoM in May 2025. Additionally, core inflation, which excludes food and energy items, fell 10 bps to 0.1% MoM in May 2025 from 0.2% MoM in April 2025 (Figure 1). It was due to decrease in the apparel index of 0.4% MoM in May 2025.

Indonesia's foreign exchange reserves remained stable at US$152.5 billion in May 2025 compared to April 2025. This stability was attributed to tax and service revenues, as well as oil and gas foreign exchange receipts, amid requirements for government foreign debt payments and Rupiah exchange rate stabilization policies in the face of persistently high global financial market uncertainty in May 2025 that reserves were equivalent to 6.4 months of imports or 6.2 months of imports plus government foreign debt payments, exceeding the international adequacy standard of approximately 3 months of imports.

In May 2025, the S&P Global US Manufacturing PMI rose to 52 due to stronger domestic demand and inventory buildup amid tariff concerns, while the ISM Manufacturing PMI fell slightly to 48.5, reflecting ongoing contraction. The service sector showed mixed results: the S&P Global Services PMI improved to 53.7 with increased hiring, but the ISM Services PMI dropped to 49.9, signaling contraction influenced by rising costs from tariffs. Overall, tariffs and trade issues continued to pressure both sectors, causing inflation and supply challenges.

Indonesia's Consumer Price Index (CPI) experienced a decrease in inflation to 1.60% YoY in May 2025 from 1.95% YoY in April 2025. The realized inflation was below the consensus forecast of 1.94% YoY. Core inflation also decreased to 2.40% YoY in May 2025 from 2.50% YoY in April 2025. Commodities contributing to decreased core inflation included jewelry, cooking oil, and ground coffee. Meanwhile, the volatile food group experienced deflation of -1.17% YoY in April 2025, primarily driven by price decreases in broiler chicken, shallots, red chilies, tomatoes, and chicken eggs in April 2025. The administered price group experienced inflation of 1.36% YoY, with significant contributions from drinking water tariffs, machine-made kretek cigarettes, and hand-rolled kretek cigarettes.

Indonesia's Trade Balance Surplus (NPI) decreased significantly to US$0.16 billion in April 2025 from US$4.33 billion (Figure 1). This decline was due to a significant decrease in the non-oil and gas surplus, from US$ 6.00 billion in March 2025 to US$ 1.51 billion in April 2025. The main contributors of decreased were animal and vegetable fats and oils, mineral and vegetable fuels, and iron and steel. Meanwhile, the oil and gas trade balance recorded a deficit of US$1.35 billion in April 2025, with crude oil and petroleum products as the main contributors. The NPI surplus has maintained its positive trend for 60 consecutive months since May 2020.

U.S. economic growth contracted by -0.20% QoQ in the second estimate for Q1 2025, down from 2.40% QoQ in Q4 2024, as released by the US Bureau of Economic Analysis, and slightly better than market expectations of -0.3% QoQ contraction. It aligns with the slowdown in general inflation indicators, specifically the Personal Consumption Expenditure (PCE), which decreased to 2.10% year-over-year (YoY) in April 2025 from 2.30% YoY in March 2025. Meanwhile, the unemployment rate in May 2025 is expected by market consensus to remain stable at 4.2%, unchanged for two consecutive months since March 2025 (Figure 1). U.S. GDP growth was driven by personal consumption expenditure, which fell to 0.8% QoQ from 2.7% QoQ in Q4 2024, representing 69.4% of total GDP (Figure 2). Personal consumption value increased by 1.2% QoQ to US$16.3 trillion, supported by increased spending on clothing and footwear. Other expenditures showed domestic investment growing at the highest rate of 24.4%QoQ. At the same time, government spending slowed by 0.7% QoQ due to President Donald Trump's policy of maintaining efficient government operations overseen by the Department of Government Efficiency (DOGE). Net exports showed the highest slowdown at 30.9% QoQ due to rising import values, as goods and services were not produced domestically.

Broad money supply (M2) growth slowed to 5.2% YoY, reaching Rp9,390.0 trillion in April 2025, down from 6.1% YoY in May 2025. By component, M2 growth was driven by narrow money (M1) growth of 6.0% YoY and quasi-money growth of 2.4% YoY in March 2025. M2 growth was supported by M1 growth of 55.6%, consisting of 8.7% MoM growth in currency outside commercial banks and rural banks and 5.9% MoM growth in rupiah demand deposits, including electronic money and rupiah savings that can be withdrawn at any time, in April 2025. Meanwhile, on a monthly basis, M2 experienced a slight decrease of 0.49% MoM (Figure 1), in line with declining inflation in April 2025 following the normalization after the Religious Holiday (HBKN) was Hari Raya Idul Fitri.