- Decision
- Lower
- Rate change
- 25 bps
- BI-rate
- 5%
Bank Indonesia cut the BI-Rate by 25 bp to 5.00 %, trimmed the Deposit Facility to 4.25 % and the Lending Facility to 5.75 % at its 19–20 August meeting, saying lower projected inflation within the 2.5 ± 1 % target band, a stable rupiah and the need to sustain growth justify the move. Building on 25 bp cuts in January, May and July, the policy rate has now been lowered by a cumulative 100 bp from 6.00 % to 5.00 % in 2025. To cement transmission, the central bank will intensify its “pro-market” operations by fine-tuning the rate structure of monetary and FX-swap instruments, conducting measured SRBI auctions, purchasing government bonds and intervening in spot, DNDF and offshore NDF markets to safeguard liquidity and currency stability. July CPI eased to 2.37 % y/y with core at 2.32 %, while Q2 GDP quickened to 5.12 % y/y and BI sees 2025 growth exceeding the midpoint of its 4.6–5.4 % forecast range despite credit growth slowing to 7.03 % y/y; banking resilience is underpinned by a 25.81 % capital-adequacy ratio and 2.22 % gross NPLs. The external position remains solid: a USD 4.1 bn June trade surplus, USD 1.0 bn SBN inflows in July–15 August and USD 152 bn in reserves (6.3 months of imports) have supported a 1.29 % rupiah appreciation versus the USD this month. BI notes that expanded US reciprocal tariffs are curbing the global outlook below the earlier 3 % growth projection and keeping market uncertainty high despite softer US inflation and prospects of lower Fed rates. It will “continue considering further room” for additional easing 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.