Anastasya Lavenia Yudi, Jakarta – Bank Indonesia has decided to cut the benchmark interest rate, or BI Rate, to 5.00 percent. This decision was agreed upon during the Bank Indonesia Board of Governors Meeting held on August 19-20, 2025.

This reduction marks the fourth time in 2025, following previous cuts in January, May, and July. Last month, the Board of Governors Meeting reduced the BI Rate to 5.25 percent from the earlier 5.50 percent.

"Based on assessments, projections, and various future directions, the Bank Indonesia Board of Governors Meeting on August 19-20, 2025, has decided to decrease the BI Rate by 25 basis points to 5.00 percent," said Governor of Bank Indonesia Perry Warjiyo during a virtual press conference on Wednesday, August 20, 2025.

BI also lowered the deposit facility interest rate to 4.25 percent from the previous 4.50 percent. Meanwhile, the lending facility interest rate decreased to 5.75 percent from 6.00 percent.

According to Perry, this decision is consistent with the low inflation forecast for 2025 and 2026, the 2.5 percent target with a margin of plus or minus 1 percent, the maintenance of the rupiah exchange rate stability, and the need to promote economic growth.

"In the future, BI will continue to consider the room for decreasing interest rates to promote higher economic growth in line with the low inflation forecast while maintaining the stability of the rupiah exchange rate," Perry said.

Previously, the Institute for Economic and Social Research (LPEM), Faculty of Economics and Business, University of Indonesia, assessed that Bank Indonesia needs to hold the benchmark interest rate or BI Rate at 5.25 percent.

LPEM FEB UI economist Teuku Riefky stated that Indonesia's inflation is currently trending upwards. "General inflation has continued to rise since last May and reached 2.37 percent year on year in July 2025," Riefky said in the Macroeconomic Analysis Series quoted on Wednesday, August 20, 2025.

Meanwhile, from an external perspective, Riefky mentioned that Indonesia is experiencing a rapid influx of foreign capital and a strengthening of the rupiah exchange rate. Riefky stated that investors interpret the current inflation and unemployment figures in the United States as a signal that the Federal Reserve (the Fed) will cut interest rates soon. Additionally, Indonesia's credit default swap (CDS) also decreased from 75.16 to 67.53 during the same period, indicating a decrease in investor risk perception of Indonesia.

Source: https://en.tempo.co/read/2041378/bank-indonesia-lowers-benchmark-interest-rate-to-