FX.co ★ Bank Indonesia Lowers Rates as Expected

Bank Indonesia reduced its benchmark interest rate by 25 basis points to 5.25% during the policy meeting in July 2025, a decision that aligned with market expectations. This adjustment is based on forecasts that inflation for 2025–2026 will remain within the target range of 2.5±1%. Additionally, the Rupiah's exchange rate remains stable, and the central bank continues its initiatives to bolster economic growth. Annual inflation in June increased to 1.87%, up from 1.60% in May, slightly exceeding projections yet still within the targeted range. The Rupiah appreciated by 0.34% against the US dollar in June and has maintained stability through mid-July, largely due to Bank Indonesia's stabilization efforts. Economic growth for 2025 is anticipated to fall between 4.6% and 5.4%, spurred by enhanced exports as a result of successful US tariff negotiations, stronger domestic demand, and supportive measures from both the government and the central bank. Moreover, the overnight deposit and lending facility rates were reduced by 25 basis points to 4.50% and 6.00%, respectively.