- Decision
- Lower
- Rate change
- 25 bps
- BI-rate
- 5.25%
Bank Indonesia’s Board of Governors cut the BI-Rate by 25 bp to 5.25 %—accompanied by 25 bp reductions in the Deposit Facility and Lending Facility rates to 4.50 % and 6.00 %, respectively—citing a continued decline in inflation towards the 2.5 ± 1 % target corridor for 2025-26, rupiah stability and the need to bolster growth. After lowering the policy rate by 25 bp in May following an earlier January cut, the Board held it steady in June before this latest move. The central bank will maintain ample liquidity through SRBI auctions, FX swaps and secondary-market SBN purchases, and stands ready to intervene in spot, DNDF and offshore NDF markets to stabilise the currency. CPI inflation eased to 1.87 % y/y in June while GDP growth is projected at 4.6-5.4 % in 2025; credit growth slowed to 7.77 % y/y in June despite ongoing macroprudential incentives. Externally, the May trade surplus widened to USD4.3 bn and foreign reserves remained high at USD152.6 bn (6.4 months of imports), supporting a rupiah that appreciated 0.34 % in June. The decision comes amid renewed global uncertainty from forthcoming US tariff increases, muted growth in major economies and expectations of future Federal Funds Rate cuts. The Board signalled that it will “continue considering further room for interest rate reduction” while prioritising inflation control and exchange-rate stability.
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.