- Decision
- Maintain
- Rate change
- 0 bps
- BI-rate
- 5.5%
Bank Indonesia’s Board of Governors left the BI-Rate unchanged at 5.50 percent, with the Deposit Facility at 4.75 percent and the Lending Facility at 6.25 percent, arguing that subdued May CPI inflation of 1.6 percent y/y (core 2.4 percent) keeps price pressures comfortably within the 2.5 percent ±1 ppt target while rupiah stability must be preserved amid lingering global uncertainty and a still-moderate domestic recovery. After cumulative 50 bp of cuts since January, the central bank is now assessing “further room” for easing. Implementation continues to rely on rupiah-stabilisation via on- and offshore NDF, spot and DNDF operations, complemented by secondary-market SBN purchases and a “pro-market” liquidity toolkit, with IndONIA easing to 5.34 percent and SRBI rates falling across key tenors. BI forecasts 2025 growth at 4.6-5.4 percent as Q2 data show firmer non-oil exports and authorities deploy fiscal transfers and augmented macro-prudential liquidity incentives; bank credit expanded 8.4 percent y/y in May despite softer deposit growth, and liquidity remains ample with an LA/TPF ratio of 24.98 percent and a 25.41 percent CAR. Externally, the April trade surplus (USD0.2 bn) and USD1.7 bn net SBN inflows have helped keep reserves high at USD152.5 bn (6.4 months of imports) and supported a marginal 0.06 percent rupiah appreciation versus the USD month-to-date. BI sees global growth stuck near 3 percent as US tariff negotiations and Middle-East tensions sustain volatility, though softer US inflation is bolstering expectations of future Fed rate cuts. The Board reiterates readiness to ease further if consistent with the inflation target and exchange-rate stability while continuing to deepen money and FX markets and expand 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.