The Effect of Interest Rates and Inflation on Profitability (ROA) of Financial Companies in the Banking Sector Listed on the IDX

Abstrak

The current phenomenon in Indonesia has experienced an increase in interest rates in the 2021-2024 period, with the explanation that Indonesia had the highest interest rate value reaching 6.10% in 2024. And Indonesia had the highest and lowest interest rate value in 2021 at 3.52%. Then the interest rate or BI rate is a provision given by Bank Indonesia so that the interest rate is also a reference for banks in determining how much of the profit will be offered to customers in the form of interest. Interest rates have a reference that fluctuates directly on the net interest margin of the banking sector, which has a direct impact on company profitability. So the population in this study was 47 (forty-seven) companies, using Simple Random Sampling which was carried out randomly and each population had an equal opportunity to be selected as a sample. And Purposive Sampling, a type of sampling chosen based on certain criteria determined by the researcher according to the research objectives. then being sorted into 23 (twenty-three) companies that met the requirements as samples in this study. Based on the results of partial tests and the results of simultaneous tests of interest rates and inflation on profitability. So it can be concluded that interest rates and inflation together have a significant influence on profitability. So that interest rates and inflation have an impact on profitability because high inflation can reduce bank profitability by reducing people's purchasing power and the risk of bad credit, while increasing interest rates generally increase bank profitability because interest income increases, but can also increase the cost of funds and credit risk.