Bank Indonesia Cuts Benchmark Rate by 25 Bps to 4.75%
Key Takeaways
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JAKARTA, Investortrust.id — Bank Indonesia has cut its benchmark interest rate by 25 basis points to 4.75% on Wednesday, Sept 17, 2025, marking a total reduction of 125 basis points year to date. The decision reflects confidence that inflation remains subdued and provides room for further monetary easing to support economic growth.
Governor Bank Indonesia Perry Warjiyo said the central bank’s Board of Governors reached the decision during its monthly policy meeting held on Sept 16–17. The deposit facility rate was lowered by 50 basis points to 3.75%, while the lending facility rate was cut by 25 basis points to 5.5%.
“Bank Indonesia has decided to lower the BI Rate by 25 basis points to 4.75%. The deposit facility rate has been cut to 3.75% and the lending facility rate to 5.5%,” Perry said in Jakarta.
He explained that the decision aligned with the outlook of inflation in 2025 and 2026 remaining within the target band of 2.5% plus or minus 1%. Maintaining rupiah stability in line with its fundamentals also remained a key priority.
“Going forward, Bank Indonesia will continue to monitor prospects for economic growth and inflation while utilizing the available room for monetary easing with due consideration of rupiah stability,” Perry said.
Liquidity Expansion and Credit Push
Perry emphasized that accommodative policy would be reinforced through liquidity expansion and looser macroprudential measures to help lower borrowing costs, ensure ample liquidity, and encourage credit growth to sustain higher economic expansion.
He also pointed out that the global environment remains fragile, with slowing growth and declining inflation prompting most central banks, except Japan’s, to ease policy further.
The governor noted that the probability of a Federal Reserve rate cut has increased, in line with rising unemployment and falling inflation in the United States. Yields on the US 10-year Treasury Note have also declined amid expectations of a Fed rate cut. “We will await the Fed’s decision tomorrow,” Perry said.
Defiying Expectation
Prior to the announcement, economists had widely predicted the central bank would keep the BI Rate unchanged at 5%. Andry Asmoro, Chief Economist at Bank Mandiri, said earlier that Bank Indonesia was likely to wait for monetary transmission effects to unfold and to assess the Federal Reserve’s policy direction.
“Bank Indonesia needs to wait until the end of the month and watch the Fed’s decision on whether to cut its benchmark rate,” Andry told Investortrust.id.
LPEM FEB UI economist Teuku Riefky also projected no change, citing inflation still within target and core inflation reflecting weak domestic demand. “Recent price movements are largely seasonal,” he noted in his commentary.
LPEM UI research highlighted that expectations of a Fed rate cut had spurred $0.46 billion in net capital inflows into Indonesia between Aug 8 and Sept 8, pushing down the 10-year government bond yield from 6.55% to 6.44%.
However, sentiment reversed after President Prabowo Subianto’s cabinet reshuffle triggered $0.25 billion in outflows, pressuring the rupiah, which has fallen 1.795% year to date.
Pro-Growth Stance
Despite these forecasts, Bank Indonesia’s decision reinforced its pro-growth stance. Alongside the rate cut, Perry emphasized that accommodative policy would be supported by liquidity expansion and looser macroprudential measures to lower borrowing costs and stimulate credit growth.
The governor also underlined the importance of global dynamics, noting that expectations of a Federal Reserve rate cut have increased due to rising US unemployment and moderating inflation.
Perry projected Indonesia’s economic growth in 2025 will come in above the midpoint of the 4.6% to 5.4% range, supported by stronger performance in the second half of the year.
“As a result, overall growth in 2025 will be above the midpoint of the 4.6% to 5.4% range,” Perry said.
He noted that household consumption remained subdued, particularly among lower-income groups, due to weak consumer expectations and limited job creation. He added that investment needs to be accelerated through faster implementation of government priority programs, including the development of Special Economic Zones.
Indonesia’s exports are also expected to improve, led by higher shipments of agricultural and manufactured goods. Palm oil exports to India are projected to rise following a reduction in that country’s import duties.
On the fiscal side, Bank Indonesia expects government spending to increase in the second half of 2025, driven by priority projects in food security, energy, defense and security, as well as the government’s 2025 Economic Policy Package.
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