Bank Indonesia Holds Policy Rate At 4.75%, Focuses On Stability And Growth

Jakarta - The Board of Governors of Bank Indonesia (BI) concluded its meeting on October 21-22, 2025, with a decision to hold the country's key monetary policy rate steady. The central bank maintained the BI-Rate at 4.75%, the Deposit Facility rate at 3.75%, and the Lending Facility rate at 5.50%. This decision underscores a continued accommodative stance, aligning with inflation forecasts for 2025 and 2026 that remain within the target band of 2.5% ± 1%. The policy is designed to maintain the stability of the Rupiah's exchange rate in line with economic fundamentals while navigating persistently high global uncertainty and supporting broader economic growth.

The global economic landscape presents significant headwinds, characterized by a slowing trend fueled by uncertainty from US tariff policies. Recent US tariffs on pharmaceuticals, furniture, and automotive sectors, coupled with announced plans for substantial additional tariffs on Chinese goods, have weakened global trade performance. This environment has led to net capital outflows from emerging markets, including Indonesia, which recorded portfolio investment outflows of $5.26 billion from September to mid-October 2025. In response, BI has actively intervened in foreign exchange markets to stabilize the Rupiah.

Domestically, Indonesia's economy showed resilience in the third quarter of 2025. Growth was supported by a rise in exports, particularly palm oil (CPO) and steel, as exporters anticipated reciprocal US tariffs. However, domestic demand, including household consumption and investment, requires continued strengthening. The government's spending contributed positively to domestic demand and overall economic growth during the period.

Read: Indonesia Charts Economic Future With Food Security And Sustainability Initiatives

A cornerstone of BI's current strategy is the aggressive stabilization of the Rupiah. Following a period of weakness in September 2025, the currency strengthened to Rp16,585 per US dollar by October 21, aided by BI's interventions. These measures included actions in the spot market, both offshore and onshore Non-Deliverable Forward (NDF) markets, and secondary market purchases of government securities (SBN). The policy of mandating natural resource exporters to convert their foreign exchange earnings to Rupiah has also provided crucial support.

Inflationary pressures in Indonesia remain broadly contained. Headline inflation was recorded at 2.65% year-on-year in September 2025, with core inflation low at 2.19%. This stability is attributed to economic output still operating below capacity and well-anchored inflation expectations. However, volatile food inflation rose to 6.44%, driven by seasonal factors and increased production costs for commodities like chilies, onions, rice, and poultry.

Beyond the policy rate, BI is implementing a potent mix of monetary and macroprudential measures. Since September 2024, the BI-Rate has been reduced by a total of 150 basis points to its current level, the lowest since 2022. The central bank is also expanding Rupiah liquidity, evidenced by a decrease in its short-term monetary instrument (SRBI) holdings and active purchasing of government bonds in the secondary market, which reached Rp268.36 trillion by late October. These purchases are conducted transparently and are consistent with monetary program goals.

Indonesia's external position remains robust, underpinned by strong foreign exchange reserves. At the end of September 2025, reserves stood at $148.7 billion, sufficient to finance 6.2 months of imports—well above the international adequacy standard of approximately three months. The current account is estimated to have recorded a surplus in Q3 2025, supported by a sustained trade surplus.

Looking forward, Bank Indonesia has signaled it will closely monitor the effectiveness of its accommodative policy transmission, the prospects for economic growth and inflation, and Rupiah stability to gauge room for future interest rate adjustments. The central bank's integrated policy approach aims to fortify economic stability while fostering conditions for sustainable, higher growth in the periods ahead.

---

Bank Indonesia BI-Rate Economic Growth Inflation Interest Rate Monetary Policy Rupiah Stability