Indonesia’s central bank kept its key interest rates unchanged on Wednesday, marking a pause in its recent monetary easing cycle as policymakers seek to strike a balance between supporting economic momentum and maintaining currency stability.
The decision, widely anticipated by economists, leaves the seven-day reverse repurchase rate at 5.50%, with overnight deposit and lending rates at 4.75% and 6.25%, respectively.
Since September, Bank Indonesia (BI) has reduced its policy rate three times in a bid to bolster growth. However, persistently soft domestic demand and growing external risks—including headwinds from U.S. tariffs and geopolitical tensions—have forced the central bank to dial back its outlook for economic growth twice this year.
For 2025, BI maintained its GDP forecast in the 4.6–5.4% band. Governor Perry Warjiyo told reporters that BI will continue to assess conditions for additional stimulus if required, but remains focused on keeping inflation within its 1.5%–3.5% target and safeguarding the rupiah’s value.
Annual inflation slowed to 1.6% in May, near the lower bound of the official target, signaling subdued household spending—a trend that has raised concerns among some analysts about the outlook for private consumption.
In response, the Indonesian government has stepped in with a US$1.5 billion incentive package aimed at revitalizing demand. The stimulus features subsidies for public transportation as well as direct cash and food assistance for households through June and July, reflecting a broader effort to counteract economic softness.
