Bank Indonesia cut its benchmark BI-Rate by 25 basis points to 5.75% on 15 January 2025, an unexpected move that marked its first reduction since September 2024. The central bank also lowered its deposit facility and lending facility rates by 25 basis points each, to 5.00% and 6.50% respectively.
The decision followed three consecutive meetings at which the BI-Rate was held at 6.00%. Bank Indonesia had begun easing on 18 September 2024 with a 25 basis point cut from 6.25%, its first reduction since February 2021.
GROWTH SUPPORT
Bank Indonesia cited the need to support economic growth as the reason for the cut. Governor Perry Warjiyo said it was the right time to lower the interest rate, and indicated that the central bank expected growth in 2025 to be slower than it had previously projected, below the 5.1% midpoint of its 4.7%–5.5% forecast range.
Headline consumer price inflation stood at 1.6% year on year in December 2024, near the bottom of Bank Indonesia's 1.5%–3.5% target range, and Warjiyo expressed confidence that inflation would remain within that range during 2025.
RUPIAH
The cut came as the rupiah was under pressure from a strong US dollar. Bank Indonesia said the currency's weakness was under control. The central bank had raised the BI-Rate by 25 basis points to 6.25% in April 2024 to defend the rupiah, before reversing that increase in September.
The January decision was the first policy move of 2025 by Bank Indonesia's Board of Governors, taking the BI-Rate 50 basis points below its April 2024 peak of 6.25%.