Indonesia’s FX Reserves Hit Record US$152.6 Billion in June, Bolstering Rupiah Amid Global Uncertainty
Indonesia's foreign exchange reserves increased to US$152.6 billion in June 2025 from US$152.5 billion in May 2025. It was attributed to factors including increased tax and service revenues, as well as government global bond issuance amid Rupiah exchange rate stabilization policies in response to global economic uncertainties. The foreign exchange reserves position at the end of June 2025 was equivalent to 6.4 months of imports or 6.2 months of imports and government external debt payments, well above the international adequacy standard of approximately 3 months of imports.
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Indonesia’s June 2025 Inflation Rises to 1.87% YoY, Exceeding Expectations
Indonesia's Consumer Price Index (CPI) experienced inflation of 1.87% YoY in June 2025, up from 1.60% YoY in May 2025. This inflation realization was above the consensus forecast of 1.83% YoY. Core inflation slightly decreased to 2.37% YoY in June 2025 from 2.40% YoY in May 2025. Commodities contributing to core inflation components included jewelry, ground coffee, and cooking oil. Meanwhile, the volatile food component experienced inflation of 0.57% YoY in June 2025, primarily supported by increases in rice, coconut, and tomato prices in May 2025. The administered price component experienced inflation of 1.34% YoY, with significant contributions from water utility rates, Machine-Made Kretek Cigarettes and Hand-Rolled Kretek Cigarettes (Figure 1).
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Indonesia’s Trade Balance Hits Higher in May, Driven by Non-Oil & Gas Goods
Indonesia's Trade Balance Surplus (NPI) increased to US$4.30 billion in May 2025 from US$0.16 billion (Figure 1). This increase was driven by a significant rise in non-oil and gas surplus to US$5.83 billion in May 2025 from US$1.51 billion in April 2025. The growth was contributed by animal and vegetable fats and oils, mineral and vegetable fuels, as well as iron and steel. Meanwhile, the oil and gas trade balance recorded a deficit of US$1.53 billion in May 2025, primarily due to the decline in crude oil and petroleum products. The NPI surplus has maintained its position for 61 months since May 2020.
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U.S. GDP Shrinks 0.5% QoQ in 1Q25: Trade War, Sluggish Spending, and Government Cuts Spending
U.S. economic growth contracted by 0.5% QoQ final in 1Q25 from 2.40% QoQ in 4Q24, as released by the US Bureau of Economic Analysis, and below market expectations of 0.2% QoQ expansion. It aligns with the slowdown in general inflation indicators, namely Personal Consumption Expenditure (PCE) to 2.30% YoY in March 2025 from 2.70% YoY in February 2025. Meanwhile, the unemployment rate in March rose to 4.2% from 4.1% in February 2025.
U.S. Growth Domestic Product (GDP) has growth driven by personal consumption expenditure contribution, which grew only by 0.5% QoQ or 69.3% of total GDP. Based on value, personal consumption increased by 0.11% QoQ to US$18.6 trillion, supported by increased household service spending. Other expenditures, such as domestic investment, grew highest at 23.8% QoQ. In comparison, government spending slowed by 0.6% QoQ due to U.S. President Donald Trump's policy of maintaining efficient government operations overseen by the Department of Government Efficiency (DOGE). In terms of net exports, the highest slowdown contracted by 29.07% QoQ due to rising import values as goods and services were not produced in the US (Figure 2).
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Indonesia’s M2 Money Supply Slows in May Amidst Weaker Credit Growth?
Broad money supply (M2) grew by 4.9% YoY to IDR 9,490.0 trillion in May 2025, albeit slower than 5.2% YoY in April 2025. By component, M2 money growth was driven by narrow money supply (M1) growth of 6.3% YoY and quasi-money growth of 1.5% YoY in May 2025. M2 money growth was supported by M1 money supply growth of 55.5%, comprising currency outside commercial banks' growth of 10.7% YoY and rural banks, as well as rupiah demand deposits, which included electronic money growth of 17.4% YoY and withdrawable rupiah savings growth of 4.3% YoY in May 2025. Meanwhile, on a monthly basis, the M2 money supply increased slightly by 0.19% MoM (Figure 1), in line with the relatively long holidays from Vesak Day and collective leave.
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The Fed Hold Interest Rates, Still Projects Two Rate Cuts
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.
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BI Holds Rates at 5.5%: Focus on Rupiah Stability & Growth Amid Global Headwinds
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.
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Consumer Confidence Index Drops as Job Market Pessimism and Retail Sales Slower
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.
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U.S. Inflation Cools More Than Expected in May, Fueling Rate Cut Hopes
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.
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Indonesia’s Economic Resilience: Stable Reserves and a Strengthening Rupiah in May
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.
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