Bank Indonesia (BI) has decided to keep its policy rate unchanged at 4.75%, a move that aligns with market expectations and underscores the central bank's focus on maintaining the stability of the Indonesian Rupiah (IDR) rather than tightening monetary policy further [1]. According to ING’s Deepali Bhargava, BI is comfortable with the current inflation outlook, expecting the Consumer Price Index (CPI) to remain within its target range of 1.5-3.5%, aided by ongoing fuel subsidies that help contain inflationary pressures [1].
Instead of adjusting rates, BI is expected to rely on non-rate tools to manage currency stability, reflecting its commitment to supporting the rupiah without resorting to further hikes [1]. With economic growth showing signs of weakening, the central bank is unlikely to raise rates and is projected to maintain its current stance into 2026, which may limit monetary support for the currency in the near term [1].
ING anticipates that policy rates will remain unchanged through the third quarter of this year, with the possibility of rate cuts by year-end if growth continues to soften [1]. This forward-looking guidance suggests that BI is prepared to shift towards a more accommodative stance should economic conditions warrant such action [1].
CONCLUSION
Bank Indonesia's decision to hold rates at 4.75% highlights its focus on rupiah stability and a measured approach to inflation, supported by fuel subsidies. With growth weakening, the central bank is expected to keep rates steady in the near term, with potential for cuts later in the year if economic conditions deteriorate.