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Maintaining Stability: Bank Indonesia Holds Interest Rate at 4.75%

Bank Indonesia (BI) has maintained its benchmark interest rate at 4.75% at its latest policy meeting, following six consecutive cuts since 2024.
This decision marks a shift in focus from easing to stabilisation, amid pressure on the rupiah and sluggish credit flow to the real economy.

Focus on Balance and Credibility
Inflation remains under control at 2.6%, still within BI's target range of 1.5–3.5%, yet global volatility and foreign capital outflows are putting pressure on the rupiah's value.
In such circumstances, BI has opted for a cautious approach: holding the interest rate to maintain external stability, whilst ensuring that the effects of previous rate cuts are fully transmitted to the domestic economy.

In other words, BI is allowing time for monetary policy transmission to take effect.

Why the Impact of Easing Has Yet to Be Felt
Despite a cumulative interest rate reduction of 150 bps since 2024, new loan rates have fallen by approximately 15 bps on average.
This significant gap highlights BI's primary challenge: ensuring that monetary easing is genuinely translated into lower borrowing costs for businesses and households.

Banks remain cautious due to two factors: tight liquidity and elevated credit risk in the SME and consumer segments.
As a result, credit growth is progressing more slowly than expected, particularly in productive sectors.

Next Steps: Incentives to Boost Credit
To address the transmission challenge, BI will launch new macropolicy incentives starting 1 December 2025, which will reward banks that reduce lending rates more quickly.
The objective is straightforward: to encourage liquidity flows to productive sectors and accelerate domestic consumption recovery without creating inflationary pressure.

This policy clarifies BI's new direction, where BI is not simply adding more easing, but ensuring that existing easing is truly effective.

With the benchmark rate held at 4.75%, BI is preserving flexibility to continue lowering rates in 2026 should credit growth begin to pick up and external pressures ease.

For now, the priorities are exchange rate stability and the effectiveness of monetary transmission, which are two essential foundations for sustaining Indonesia's economic growth.