Indonesia Macro Update - BI Policy Mix May 2025
KBVS MACRO UPDATE
Monday, 2 June 2025
Bank Indonesia’s Policy Mix and Its Future Implications
Bank Indonesia (BI) has once again reaffirmed its position as the key monetary and macroprudential authority in Indonesia. Following the Board of Governors Meeting (RDG) held on 20–21 May 2025, the central bank announced a 25 bps cut to the BI-Rate, bringing it down to 5.50%. In line with this decision, the Deposit Facility rate was reduced to 4.75% and the Lending Facility rate to 6.25%. This move reflects BI’s continued commitment to maintaining stability while supporting the country's broader economic goals.
BI’s decision in May 2025 demonstrates that the central bank is not only reactive to short-term market conditions but also guided by a strategic, long-term policy framework. The balance between inflation targeting, exchange rate stability, financial system health, and support for growth reflects a comprehensive understanding of Indonesia’s dynamic economic landscape. As the country continues to navigate global challenges and domestic structural reforms, Bank Indonesia stands as a crucial pillar in maintaining trust, stability, and forward momentum.
Interestingly, this recent rate cut came sooner than our (KBVS) expectation. Looking ahead, another 25 bps reduction in the BI-Rate is projected around Sep or Oct ‘25, coinciding with further anticipated Fed rate cuts in Oct ‘25. This sequence underscores BI’s responsiveness to both domestic conditions and external monetary policy shifts, reflecting a nuanced approach to maintaining policy alignment with global trends while prioritizing Indonesia’s unique economic landscape.
Regards,
Fikri C Permana – KBVS Research Team