Bank Indonesia (BI) unexpectedly left its benchmark interest rate unchanged at 5.75% at its October 21 meeting, marking the fourth consecutive hold and surprising markets that had anticipated a 25 bps increase. At the same time, BI cut reserve requirement (RR) ratios, lowering them from 9% to 7% for conventional banks and from 7.5% to 5.5% for Islamic banks. The central bank reiterated that its priority remains keeping inflation within the target band while still supporting GDP growth.
Earlier this year, BI raised its policy rate by a total of 100 bps in May and June, bringing it to its highest level since April 2025 in an effort to attract foreign capital inflows and stabilize the rupiah. Annual headline inflation quickened to a three-month high of 3.28% in September, even as core inflation moderated to 2.84%. BI expects inflation to stay within its 2.5% ± 1% target range and has maintained its 2026 GDP growth forecast at 4.9%–5.7%.
In addition to holding the key policy rate, BI kept the rate on its lending facility at 6.5%, while raising the overnight deposit facility rate (DFR) by 25 bps to 5%.
