- Decision
- Maintain
- Rate change
- 0 bps
- BI-rate
- 5.75%
Bank Indonesia’s Board of Governors kept the BI-Rate unchanged at 5.75 percent and left the Deposit and Lending Facility rates at 5.00 percent and 6.50 percent, respectively, on 19 February, citing the need to safeguard the rupiah and ensure consumer price inflation stays within the 2.5 ± 1 percent target band in 2025-26 while supporting growth. After January’s 25 bp cut that brought the policy rate to its current level, the central bank reaffirmed its pro-market operating framework, maintaining spot and DNDF FX interventions, expanding use of SRBI/SVBI/SUVBI instruments, and lifting the ceiling on the Macroprudential Liquidity Incentive (KLM) to 5 percent of third-party funds (around IDR 80 trn) from 1 April. January CPI inflation eased sharply to 0.76 percent y/y, core inflation held at 2.36 percent, and GDP growth remained solid at 5.02 percent y/y in Q4, with 2025 growth projected at 4.7-5.5 percent; bank credit grew 10.27 percent y/y in January and liquidity stayed ample (LA/TPF 26.03 percent, CAR 26.69 percent, gross NPL 2.08 percent). Externally, the January trade surplus widened to USD 3.5 bn, foreign reserves stood at USD 156.1 bn (6.7 months of imports), and the rupiah appreciated 0.15 percent month-to-date in February, limiting its year-on-year loss to 1.06 percent. The statement highlights persistent global uncertainty, solid US growth, high US Treasury yields and a strong dollar as key external risks. The central bank will keep monitoring price and growth dynamics and rupiah movements to assess “further room for monetary easing” while sustaining coordinated macroprudential, FX and payment-system measures.
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.