Indonesia’s central bank, Bank Indonesia (BI), cut its benchmark interest rate by 25 basis points to 5.25% on Wednesday — its fourth rate cut since September — as the country grapples with slowing domestic demand and a challenging global trade environment.
The move, which also included reductions in two other key rates, was in line with expectations from a slim majority of economists polled by Reuters.
BI Governor Perry Warjiyo said the central bank remains open to further easing, citing low inflation projections through 2026, a stable rupiah, and a gloomy global economic outlook. “BI is already all out in boosting economic growth, including in supporting loan growth,” Warjiyo stated at a press briefing.
A recent breakthrough in US trade relations also encouraged the decision. President Donald Trump’s announcement of a revised tariff deal with Indonesia — lowering proposed tariffs on Indonesian exports from 32% to 19% — is expected to boost export prospects and broader economic stability.
“This deal will of course increase imports, but in our view, these are imports for productive purposes,” Warjiyo added, noting the potential for stronger capital inflows and improved business confidence.
The central bank maintained its 2025 GDP growth forecast between 4.6% and 5.4%, despite concerns over weak household consumption and external headwinds. Indonesia’s economic momentum slowed in Q1, and the outlook for the coming quarters remains uncertain due to the lingering effects of US trade policy on global commerce.
While the rupiah remained steady following the announcement, the Jakarta stock index climbed nearly 1%.
Economists see room for further easing. Mandiri Sekuritas expects one more 25-basis-point cut this year and an additional 50 bps in early 2026. “BI maintained a dovish tone, emphasising the need to support economic growth,” said economist Rangga Cipta.
