- Decision
- Lower
- Rate change
- 25 bps
- BI-rate
- 5.75%
Bank Indonesia lowered the benchmark BI-Rate by 25 bp to 5.75% and cut the Deposit and Lending Facility rates to 5.00% and 6.50%, respectively, saying subdued December CPI inflation of 1.57% y/y kept 2025-26 price pressures on track for the 2.5 ± 1 percent target while slackening domestic demand warrants support and a stable rupiah stance. To shore up transmission and attract capital, the central bank will deepen money and FX markets through expanded issuance of rupiah and FX securities (SRBI, SVBI, SUVBI), fine-tune interest rate structures, and sustain spot and DNDF interventions, alongside an accommodative macroprudential liquidity incentive (KLM) to boost bank lending to priority sectors. Inflation is expected to stay within target; GDP growth ran just below the 4.7–5.5% range midpoint in 2024 and is projected at 4.7–5.5% in 2025 amid weak consumption, investment and softer exports. Credit grew 10.39 % y/y in 2024 and is seen rising 11–13 % this year, supported by ample bank liquidity (liquid assets/TPF 25.6%) and a high 26.9 % capital adequacy ratio. Externally, a USD2.2 bn December balance-of-payments surplus and USD155.7 bn in reserves (6.7 months of imports) have limited rupiah depreciation to 1 % against the USD despite elevated global financial uncertainty and a strong dollar. The board signalled scope for further easing while pledging to keep inflation within target and the exchange rate aligned with fundamentals through its strengthened policy mix and ongoing coordination with the government and other authorities.
Rate evolution
From June 2025 to September 2026, Bank Indonesia cut the BI-Rate by 75 basis points from 5.50% to 4.75% between July and September 2025, then held it at 4.75% in October 2025 and for the following six meetings before shifting into tightening, lifting the rate to 5.50% in May 2026 and 5.75% in June 2026. The mid-2025 cuts and the October 2025 pause reflected inflation forecasts for 2025 and 2026 that remained low within the 2.5±1% target, efforts to maintain rupiah stability in the face of still-high global uncertainty, and support for growth as domestic demand and credit remained soft. At the October meeting, Bank Indonesia said it would continue to assess the transmission of the easing already delivered, the growth and inflation outlook, and rupiah stability when considering room for further BI-Rate cuts, while strengthening macroprudential policy to push lending rates lower, raise liquidity and support credit growth.
Through late 2025 and early 2026, the emphasis shifted from room for further easing to external resilience as capital flows turned more volatile, the rupiah weakened and Bank Indonesia pressed banks to pass earlier easing through to lending rates. The policy turn then hardened as turmoil from the Middle East war, higher oil prices, a stronger dollar, high US Treasury yields and foreign exchange pressures prompted Bank Indonesia to prioritise stability, with April signalling readiness to tighten further if needed, May’s increase framed as pre-emptive, and June’s further 25-basis-point increase aimed at strengthening rupiah stabilisation and keeping inflation within the 2.5±1% target in 2026 and 2027. Bank Indonesia held the BI-Rate at 5.75% from July through September as global volatility persisted, with the September decision focused on rupiah stability amid strong external pressures, the inflation target and sustainable growth, while strengthening incentives to attract foreign capital inflows and accelerating money and foreign exchange market deepening.