BI Holds at 4.75% to Defend Rupiah as Global Risks Linger

JAKARTA, Investortrust.id — Bank Indonesia or BI holds its benchmark BI Rate at 4.75% on Wednesday, Dec 17, 2025 in Jakarta to stabilize the rupiah as volatile global markets and cautious capital flows keep pressure on emerging currencies, a stance that keeps borrowing costs steady while the central bank waits for clearer room to support growth.

The decision followed the two day Bank Indonesia Board of Governors Meeting held on Dec 16 and Dec 17, 2025, and left the deposit facility rate at 3.75% and the lending facility rate at 5.50%.

"BI's Board of Governors Meeting on Dec 16 to 17, 2025 decided to maintain the BI Rate at 4.75%, keep the deposit facility rate at 3.75%, and keep the lending facility rate at 5.50%," Governor Perry Warjiyo said at the central bank's December meeting briefing on Wednesday.

Perry said the decision was consistent with efforts to safeguard rupiah stability while ensuring monetary policy transmission remained effective across the financial system. He added that the stance was also intended to help preserve macroeconomic stability as the economy navigated uncertain external conditions.

Markets had widely expected a hold, with economists arguing that the currency mattered more than the marginal boost from cheaper credit at this point in the cycle. Headline inflation was described as manageable, but BI emphasized that exchange rate swings could quickly change the calculus for prices and expectations.

A Datatrust chart tracking 2019 to December 2025 showed BI Rate at 4.75%, the Fed funds rate at 3.75%, and Indonesia inflation year on year at 2.72%, near BI's target band that was shown as a shaded corridor, capturing the core dilemma BI faced in 2025, with inflation relatively contained while exchange rate stability remained the binding constraint.

Macro Picture and Policy Trade Offs

Indonesia's policy choice unfolded against a global backdrop that BI described as still fragile, with investors prone to risk off episodes and liquidity conditions tightening quickly when US yields rose. In that setting, the central bank treated rate stability as part of a broader package aimed at anchoring confidence in rupiah assets.

The rate hold also reflected BI's view that it could not rely solely on lower global rates to ease domestic conditions, even as US policy had started to shift. BI highlighted that elevated dollar strength and high long term US yields could continue to limit foreign inflows into emerging markets, including Indonesia.

"Going forward, BI will continue to assess the room for further BI Rate cuts, in line with our forecast that 2026 inflation will remain controlled within the target of 2.5% plus or minus 1%," Perry said.

He said BI would also keep watching steps that could support Indonesia's growth outlook without undermining stability, including measures outside the policy rate itself. "BI will ease macroprudential policy by improving the effectiveness of liquidity provision to banks to accelerate the decline in lending rates and to strengthen credit growth to the real sector, especially the government's priority sectors," Perry said.

Outside the central bank, Mandiri economist Andry Asmoro said the rupiah was the key consideration behind BI's cautious posture. "Because BI will push exchange rate stability as part of support for businesses so they can grow more steadily," Andry told Investortrust.id on Wednesday.

Permata economist Josua Pardede said the door to rate cuts remained open, but timing depended heavily on the currency response around the meeting. "However, if ahead of the meeting announcement the rupiah can reverse direction significantly, BI could shift from a short term stability stance back to a pro growth stance and cut the BI Rate by 25 basis points to 4.50%," Josua said.

Josua said the case for future cuts was supported by easier US policy and domestic conditions that BI described as still within its inflation comfort zone, alongside Indonesia's ongoing trade surplus. He added that risk off investor behavior and year end regulatory uncertainty, including rules linked to natural resource export proceeds, had kept the rupiah moving sideways and encouraged BI to wait.

Teuku Riefky, a researcher at the University of Indonesia's Institute for Economic and Social Research at the Faculty of Economics and Business, warned that cutting too soon could backfire through both inflation and the exchange rate channel. "A rate cut by BI risks triggering higher inflation pressure and could push the rupiah weaker," Riefky said.

Riefky said BI's earlier decision to hold rates had already served as a signal to investors about priorities. "The policy steps taken by BI send a positive signal to investors that the central bank prioritizes its main mandate to control the rupiah rather than continuing to focus on growth through policy rate cuts," he said.