- Decision
- Lower
- Rate change
- 25 bps
- BI-rate
- 4.75%
Bank Indonesia’s Board of Governors lowered the BI-Rate by 25 bp to 4.75 %, trimmed the Deposit Facility rate by 50 bp to 3.75 % and cut the Lending Facility rate by 25 bp to 5.50 %, citing the need to bolster economic growth while keeping 2025-26 inflation within the 2.5 % ± 1 ppt target band and preserving rupiah stability. This marks a cumulative 150 bp easing since September 2024, extending the gradual rate-cut cycle that saw reductions in May, July and August 2025. To reinforce transmission, the central bank will re-align the yield structure of its monetary and FX-swap instruments, pare back issuance of Bank Indonesia Rupiah Securities (SRBI) and continue measured secondary-market purchases of government bonds, while urging primary dealers to deepen money and FX markets. August consumer price inflation eased to 2.31 % y/y, with core at 2.17 %, and the bank remains confident headline inflation will stay in target; GDP growth is forecast to finish 2025 above the midpoint of the 4.6-5.4 % range despite still-soft household demand and credit growth that inched up to 7.56 % y/y in August amid ample banking liquidity (AL/DPK 27.25 %). Externally, a USD4.2 bn July trade surplus and USD150.7 bn in end-August FX reserves (covering 6.3 months of imports) underpin a low current-account deficit of 0.5-1.3 % of GDP, while the rupiah firmed 0.3 % versus end-August on continued policy intervention and exporter FX conversion. The global backdrop remains weak and uncertain due to escalating US reciprocal tariffs, softer world growth projected around 3 % and rising expectations of US rate cuts. Bank Indonesia signalled it will “continue to monitor growth and inflation prospects and make further rate cuts while safeguarding currency stability,” complemented by ongoing liquidity expansion and macroprudential easing.
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.