- Decision
- Lower
- Rate change
- 25 bps
- BI-rate
- 5.5%
Bank Indonesia’s Board of Governors cut the BI-Rate by 25bp to 5.50% and lowered the Deposit and Lending Facility rates to 4.75% and 6.25%, citing April’s subdued 1.95 % headline inflation, well within the 2.5 % ± 1 ppt target, and the need to safeguard rupiah stability while bolstering activity amid a softer domestic outlook. After a 25 bp reduction in January and three consecutive holds at 5.75 %, the policy rate now stands 50 bp below its end-2024 level. The easing is backed by a pledge to keep inflation on target and a reinforced pro-market operations toolkit: intensified FX and bond-market interventions, a higher Bank Foreign Funding Ratio cap (to 35 % of capital from 30 % effective 1 June) and a 100 bp cut in the Macroprudential Liquidity Buffer for conventional and sharia banks to 4 % and 2.5 %, respectively, to loosen liquidity and spur credit. Growth slipped to 4.87 % y/y in Q1 from 5.02 % in Q4, prompting BI to trim its 2025 GDP forecast to 4.6-5.4 %, while bank lending growth eased to 8.88 % y/y in April. Externally, the balance of payments remains firm: May saw renewed portfolio inflows, the current-account gap is projected at 0.5-1.3 % of GDP, and reserves stood at USD 152.5 bn (6.4 months of imports) in April as the rupiah appreciated 1.13 % month-to-date against the USD. BI notes that a 90-day US-China tariff truce has lifted the 2025 global growth outlook to 3.0 %, yet warns that fluid trade negotiations could keep uncertainty high. The central bank reiterates it will prioritise price and FX stability while assessing “further room” for growth-supportive easing, supported by continued macroprudential accommodation and expanded digital-payment initiatives.
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.