BI Rate Down, Credit Interest Still Long

BI Rate Down, Credit Interest Still Long

Friday, 30 May 2025

The decrease in Bank Indonesia's benchmark interest rate or BI Rate in May 2025 is a breath of fresh air for installment warriors. The reason is that the decrease can reduce credit interest rates so that interest costs are cheaper.

It's just that it seems that installment warriors have to be patient for a little longer. Head of the BI Macroprudential Policy Department (DKMP), Solikin M Juhro said that the impact of the new interest rate reduction will be felt 6 months to 1 year after the decision is made.

"Economists say that the transmission of interest rates to credit interest rates is around 6 months, I think it's the same as our calculations. From the BI rate side to money market interest rates, it is usually shorter, 2-3 months, to fund interest rates 6 months, to credit interest rates around 1 year," said Solikin in a Media Briefing at the BI Head Office, Jakarta, Monday (5/26/2025).

Solikin said that the impact of the BI rate reduction on the economy as a whole was even up to 1.5 years. It's different if it's on money market interest rates, the impact can be felt faster.

"More or less depends, but of course the BI rate to the money market interest rate can be immediate," he said.

Previously, BI decided to lower the BI rate by 25 basis points (bps) to 5.50% after previously being held at 5.75% since January 2025. In line with that, the deposit facility interest rate also fell 25 bps to 4.75% and the lending facility interest rate fell 25 bps to 6.25%.

With this decision, BI Governor Perry Warjiyo hopes that banks can lower interest rates to encourage increased credit distribution to support higher economic growth.

"We hope that banks will lower interest rates and increase credit distribution. Let's together encourage better economic growth," Perry said in a virtual press conference, Wednesday (21/5).