Money supply (M2) grew by 5.7% YoY to IDR 9,240 trillion in January 2025, up from 5.5% YoY in January 2025. By component, M2 money growth was driven by narrow money (M1) growth of 7.4% YoY and quasi-money growth of 1.8% YoY in February 2025. M2 money growth was supported by M1 money supply growth of 55.7%, consisting of currency outside commercial banks growth of 10.9% and rural banks, as well as rupiah demand deposits comprising electronic money and rupiah savings that can be withdrawn at any time of 44.8%. While M2 money supply growth increased in February 2025, deflation occurred (Figure 1) due to PLN's 50% electricity discount for customers with power capacity below 2,200 VA and declining food commodity prices.

The Fed maintained interest rate at 4.25%-4.50% during the Federal Open Market Committee (FOMC) meeting on March 19, 2025. Fed members anticipate a slowdown in US economic growth while inflation remains high. This policy decision was made due to continued uncertainty surrounding US import tariff policies. This uncertainty underlies the Fed's cautious approach to adjusting fund rates, especially with inflation still above target. The latest Personal Consumption Expenditures (PCE) price index shows general inflation declined to 2.50% YoY in February 2025, while consensus forecasts expect inflation to stabilize at 2.40% YoY by the end of 2025.

The Bank Indonesia (BI) Board of Governors Meeting (RDG) decided to maintain the benchmark interest rate at 5.75%, with the Deposit Facility Rate at 5.00% and the Lending Facility Rate at 6.50% as of March 19, 2025. This decision is part of an effort to support Indonesia’s economic growth targets and ensure inflation remains within the target range of 2.5±1% for 2025 and 2026. BI also focuses on maintaining a market-friendly Rupiah exchange rate stability through open market operations in the spot market, Domestic Non-Deliverable Forwards (DNDF), and Government Securities (SBN) in the secondary market. The RDG’s decision to keep the benchmark rate steady is influenced by global factors, including the high uncertainty surrounding the Trump administration’s policy direction, such as import tariffs on several U.S. trading partners and tax cuts contributing to a projected slowdown in the U.S. economy. As a result, BI anticipates the Fed Funds Rate (FFR) will decrease only once by 25 basis points in 2025, affecting the Dollar Index (DXY). Furthermore, BI assesses that Indonesia’s financial instruments, such as stocks, the Rupiah exchange rate, and Government Securities (SBN), remain fundamentally attractive. BI projects Indonesia’s economic growth 2025 to be between 4.7% and 5.5%, supported by indicators such as the strong Indonesian Consumer Survey Index.

Indonesia’s trade balance surplus (NPI) fell by 10.6% MoM to $3.12 billion in February 2025. This decline was driven by a 1.6% MoM decrease in the non-oil and gas surplus, which dropped to $4.84 billion in February 2025. The primary contributors to the surplus 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 $1.72 billion in February 2025, primarily due to crude oil and petroleum product imports. Despite the decline, Indonesia’s trade balance surplus has remained intact for 58 consecutive months since May 2020.

US CPI headline inflation decreased by 30 bps to 0.2% MoM in February 2025 from 0.5% MoM in January 2025, falling below market expectations of 0.3% MoM. It was influenced by a 0.3% MoM increase in the shelter index in February 2025, accounting for nearly 50% of the monthly increase across all goods and services but was offset by a 4.0% MoM decrease in airline fares and a 1.0%MoM decline in fuel oil prices. Meanwhile, the energy index rose to 0.2% MoM with electricity and natural gas index increases. The food index also increased by 0.2% MoM in February 2025.Additionally, core inflation, which excludes food and energy items, fell 20 bps to 0.2% MoM in February 2025 from 0.4% MoM in January 2025 (Figure 1). It was primarily due to a 0.8% MoM decrease in transportation service prices.

Consumer confidence in February 2025 slightly decreased, as indicated by a drop in the overall Consumer Confidence Index, primarily due to lowered expectations regarding future job prospects. However, economic conditions, such as purchases of durable goods and income, showed positive growth. This shift in sentiment is accompanied by consumers prioritizing immediate spending over savings and debt repayment, potentially influenced by high interest rates. This is reflected in a projected retail sales growing on monthly basis because upcoming to Ramadhan.

The US labor market conditions in February 2025 were favorable, marked by three labor data indicators: unemployment rate, nonfarm payrolls, and wage growth rate. This data indicates that the US economy is improving despite The Fed's tendency to maintain a hawkish stance since the last 25bps cut on December 18, 2024. The unemployment rate slightly increased to 4.1% in February 2025 from 4.0% in January 2025 and above market expectations of 4%.

Indonesia's foreign exchange reserves declined by 1.02% MoM to US$154.5 billion in February 2025 from US$156.1 billion in January 2025. It was influenced by government foreign debt payments and rupiah exchange rate stabilization policies in response to persistently high global financial market uncertainties. Nevertheless, the current level of foreign exchange reserves remains high, equivalent to 6.6 months of imports or 6.4 months of imports and government foreign debt payments. It stands above the international adequacy standard of approximately 3 months of imports.

In February 2025, the U.S. manufacturing sector presented a mixed picture, with the S&P Global US Manufacturing PMI indicating growth driven by increased demand and potential tariff-related stock replenishment, while the ISM US Manufacturing PMI showed a slight decline due to weakened demand and tariff-induced operational shocks. Simultaneously, the services sector experienced a slowdown according to the S&P Global US Services PMI, facing challenges from weak demand and rising labor costs, though the ISM US Services PMI remained in an expansion phase. A key factor influencing both sectors was the impact of new administration tariff policies, which led to price increases, potential supply disruptions, and concerns about rising raw material costs, creating uncertainty and affecting business operations.  

US economic growth expanded by 2.30% QoQ in the second estimate for 4Q24, down from 3.10% in 3Q24, as reported by the US Bureau of Economic Analysis and in line with market expectations. Nevertheless, the headline Personal Consumption Expenditure (PCE) inflation slowed to 2.50% YoY in January 2025 from 2.60% YoY in December 2024. Meanwhile, the unemployment rate in February 2025 is expected to remain steady at 4.0%, with data scheduled for release this week (3/7)