Arnoldus Kristianus, Jakarta – Bank Indonesia kept its benchmark interest rate at 5.75 percent in a bid to control inflation and support the rupiah amid global economic uncertainty. The deposit facility rate remains at 5 percent, while the lending facility rate is unchanged at 6.5 percent.
The decision, announced after the central bank's two-day board of governors meeting on Feb. 18-19, aligns with the government's inflation target of around 2.5 percent for 2025-2026. Year-on-year core inflation in January 2025 stood at 2.36 percent.
"Bank Indonesia will continue to monitor inflation and economic growth prospects to adjust interest rate policies and maintain rupiah stability," Governor Perry Warjiyo said on Wednesday.
Warjiyo added that macroprudential and payment system policies will remain focused on sustaining economic growth.
The central bank's move was widely anticipated by economists, including Teuku Riefky of LPEM FEB UI, who cited persistent global and domestic uncertainties as key factors behind the decision.
BI's economic outlook
Bank Indonesia projects global economic growth of 3.2 percent in 2025, reflecting conditions in the United States, China, and Europe. However, economic volatility remains a significant risk for countries worldwide.
"Divergence in global economic performance continues amid high uncertainty," Warjiyo said.
The US economy is expected to remain resilient, supported by strong household consumption driven by high wages, productivity, and improved investment. Conversely, economic growth in Europe, China, and Japan remains sluggish due to weak domestic demand and declining external performance amid a global slowdown and the impact of US tariff hikes.
India's economic expansion is also constrained by fiscal consolidation and weak investment growth. Meanwhile, global financial market uncertainty remains elevated due to faster and broader US tariff policies and the direction of the Federal Reserve's monetary policy.
High US economic growth and inflation are expected to limit potential cuts in the Fed Funds Rate (FFR). In addition, expansionary US fiscal policy is keeping Treasury yields high, attracting global investors and sustaining the strength of the US dollar against other currencies.
"Persistent global uncertainty requires strong policy responses to mitigate its spillover effects, ensuring stability and supporting domestic economic growth," Warjiyo said.
Domestically, Bank Indonesia expects economic growth to range between 4.7 percent and 5.5 percent in 2025, driven primarily by increased non-construction investment.
The central bank emphasized the need to stimulate household consumption to support domestic demand further. In addition, efforts to enhance exports must continue to counter slowing demand from key trading partners.
Source: https://jakartaglobe.id/business/bank-indonesia-keeps-interest-rate-steady-at-575-pc