Bank Indonesia unexpectedly cut its benchmark interest rate by 25 bps to 5.0% at its August 2025 policy meeting, following a 25 bps cut the previous month and defying market expectations to hold rates steady. This marked the fifth rate cut since last September, bringing the benchmark to its lowest level since October 2022.
The decision reflects projections that inflation for 2025–2026 will remain within the central bank's target range of 2.5% ± 1%, a stable Rupiah exchange rate, and ongoing efforts to support economic growth. Recent data showed GDP grew by 5.12% yoy in Q2—its highest pace in two years. Meanwhile, annual inflation rose to 2.37% in July from 1.87% in June, marking a one-year high but still within the central bank's target range.
Economic growth for 2025 is projected to be slightly above the midpoint of the 4.6% to 5.4% range, at around 5.1%. Additionally, the overnight deposit and lending facility rates were lowered by 25 basis points to 4.25% and 5.75%, respectively.
Source: Trading Economi
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