Bank Indonesia leaves rates unchanged in June

Bank puts rates on hold: At its meeting on 17–18 June, Bank Indonesia (BI) kept BI-Rate at 5.50%, as market analysts had expected. BI hit the brakes in June after having cut its policy rate three times since September.

Currency risks outweigh concerns over economic growth: BI held rates stable to shield the rupiah, which has weakened so far this year vs the U.S. dollar amid rising risk aversion caused by the global trade war and surging geopolitical tensions in the Middle East. Meanwhile, the Bank still projects inflation to remain within the 1.5–3.5% target corridor in 2025 and 2026, and GDP growth to be between 4.6–5.4% in 2025.

BI likely to resume cuts to aid the economy: The Bank Indonesia said that domestic economic growth “must be strengthened” amid rising global economic uncertainty due to U.S. trade policy shifts and geopolitical tensions. Much of the Bank’s future decisions will also depend on the rupiah’s stability. Most of our panelists see 25–75 basis points of further cuts by December, though some expect rates to remain on hold. The Bank will reconvene on 15–16 July.

Panelist insight: EIU analysts said: “BI will keep a keen eye on the need to support economic growth, which has moderated recently, while inflation remains near the bottom of its target range of 1.5-3.5%. Although the rupiah has appreciated over the past month, it has been prone to bouts of weakness amid heightened global risk aversion. As a result, the central bank will also place a high importance on maintaining currency stability. This means that it will remain cautious and make only small adjustments to avoid putting excessive pressure on the rupiah. We expect this to result in a single (and final) 25-basis-point cut later in 2025.”

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