Bank Indonesia (BI) Governor, Perry Warjiyo, announced in a press conference on Wednesday (21/5/25,) that after the bank’s Board of Governors meeting from May 20 and 21, that BI has decided to cut the benchmark interest rate to 5.50 percent, according to reporting from Tempo.
Perry also announced that the deposit facility interest rate decreased by 25 basis points to 4.75 percent from the previous 5.00 percent. Furthermore, the lending facility interest rate decreased by 25 basis points to 6.25 percent from the last 6.50 percent.
Tempo is reporting that Perry stated this decision aligns with the 2025 and 2026 inflation forecasts, which are controlled within the 2.5 plus or minus 1 percent target. BI estimates that the inflation rate at the end of the year will be 2.6 percent. Additionally, Perry said that the interest rate cut is expected to boost economic growth. Economic growth in the first quarter of 2025 was 4.87 percent. The third reason is that BI sees the rupiah exchange rate as already stable and tends to strengthen.
Previously, the Institute for Economic and Social Research of the Faculty of Economics and Business, University of Indonesia (LPEM FEB UI), advised Bank Indonesia to maintain the benchmark interest rate at 5.75 percent.
“Due to external risks, Bank Indonesia must maintain the BI Rate at 5.75 percent and exercise caution until global conditions become more predictable,” economist LPEM FEB UI Teuku Riefky wrote in the Macroeconomic Analysis Series Report released on Tuesday (20/5/25.)
According to Riefky, recent inflation figures and rupiah stability indicate room for monetary loosening. However, he argued that there is no clarity on whether this stability will be sustained or temporary.
Source: Tempo
