Indonesian Macro Update - BI Rate Update 23 Oct 2025
KBVS MACRO UPDATE
Thursday, 23 October 2025
Bank Indonesia Holds Rate Steady Ahead of the Fed’s Imminent Easing Cycle
In a move that surprised markets, Bank Indonesia (BI) decided to maintain its benchmark policy rate at 4.75% (Cons: 4.50%, KBVS: 4.50%, Prev: 4.75%), defying widespread expectations of a 25 bps cut. Several key considerations shaped this decision. First, rising inflationary pressures have emerged as a constraint, with headline inflation climbing to 2.65% YoY in September 2025—the highest level since May 2024. Second, the rigidity of domestic banking rates has continued to frustrate policymakers. Third, BI’s stance reflects its sensitivity to global policy dynamics, particularly the upcoming decisions by the U.S. Federal Reserve.
However, BI remains alert to the asymmetric risks in global markets. Against this backdrop, BI’s current policy mix is designed to strike a balance between stability and growth. Looking ahead, once the Fed’s easing path becomes more definitive and domestic inflation pressures subside, further BI rate cuts could be back on the table.
Regards,
KBVS Research Team