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The Benchmark Interest Rate Set By Bank Indonesia Is Expected To Be Reduced In The Second Semester Of 2025.

Bank Indonesia (BI) is expected to lower its benchmark interest rate (BI Rate) in the second half of 2025. This reduction can only occur if the central bank has sufficient monetary easing capacity, which includes inflation being at or below BI's target, a stable rupiah exchange rate, and manageable external pressures. According to Tika Widiastuti, an economist at the Faculty of Economics and Business, Universitas Airlangga, a realistic timeframe for further interest rate cuts is the second half of 2025, provided that global conditions improve and inflationary pressures remain low. She noted that domestic indicators such as slowing economic growth and weak credit demand are also critical considerations. If the real sector shows signs of weakening and inflation remains controlled, lowering interest rates could be a strategic move to stimulate consumption, investment, and credit distribution. The last time Bank Indonesia reduced the benchmark interest rate was in January 2025, by 25 basis points (bps) to 5.75%.  

This included adjustments to the Deposit Facility rate, which was lowered by 25 bps to 5%, and the Lending Facility rate, which was also reduced by 25 bps to 6.5%. Furthermore, Tika emphasized that BI must remain vigilant regarding external pressures such as the volatility of the rupiah exchange rate, the direction of global interest rate policies, particularly those of the U.S. Federal Reserve, and domestic inflation levels. A premature decision to lower interest rates could pose risks to exchange rate stability and foreign capital flows, especially if the yield differential with other countries becomes less attractive to investors. Additionally, if inflation is not fully controlled or remains at the upper limit of BI's target, a rate cut could undermine the credibility of inflation control efforts. 

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Tag: Bank Indonesia Investment Tika Widiastuti