Indonesia: Bank Indonesia leaves rates unchanged in October
The rates kept steady at three-year low: At its meeting on 21–22 October, Bank Indonesia (BI) decided to maintain the BI-Rate at 4.75%, its lowest level since 2022. The Central Bank took a pause after having reduced the BI-Rate by 150 basis points since September 2024. The decision caught markets by surprise, as another rate cut had been priced in.
BI shows vigilance to keep rupiah stable: The Central Bank’s decision to avoid interest rate hikes was influenced by low inflation, both headline and core. Headline inflation is projected to remain within the 1.5–3.5% target corridor in 2025 and 2026. Moreover, the decision aligns with the policymakers’ focus on strengthening economic growth. Meanwhile, BI ruled out a rate cut to keep the rupiah exchange rate stable amid global financial market uncertainty and souring investor sentiment. Although the rupiah has appreciated vs the USD recently, likely due to recent BI interventions in the foreign exchange market, the rupiah remained at one of its weakest levels on record against the U.S. dollar through October.
Further rate cuts expected through end-2026: Bank Indonesia hinted at future BI-Rate reductions. The majority of our panelists expect a further cut in the policy rate of at least 25 basis points by the end of the year, in line with their previous forecasts, with only a few now projecting the rate to remain unaltered. Moreover, most panelists expect further rate cuts in 2026 as inflation remains within target, the rupiah regains ground on the USD and GDP growth remains sluggish.
The next BI meeting will be held on 18–19 November.
Panelist insight: The EIU economists commented on the outlook:
“We maintain our view that BI will resume easing with a 25-basis-point cut in December, before conducting two more cuts in the first half of 2026 as it balances inflation and currency risks against its pro-growth mandate. Our view reflects the central bank’s dovish stance and is aligned with the ambitious 5.4% growth target for 2026 set by Prabowo Subianto’s administration. Additionally, policy by the Federal Reserve (Fed, the US central bank) will shape BI’s path. We expect the Fed to conduct two more 25-basis-point cuts this year, for an end-2025 rate of 3.5-3.75%.”