Central Bank leaves rates unchanged in February

Policy rate remains at over three-year low: At its meeting on 18–19 February, Bank Indonesia (BI) decided to keep the BI-Rate steady at 4.75% for the fifth consecutive meeting. As such, the rate remained at its lowest level since late-2022. The hold aligned with market expectations.

Rupiah weakness motivates hold: Similar to January, BI kept rates unchanged in February to support the rupiah, which remained near record-weak levels against the USD. The rupiah has come under pressure due to investor unease over BI’s independence after President Prabowo Subianto nominated his nephew Thomas Djiwandono as BI deputy governor in January—Djiwandono joined the board in February. This appointment could pressure BI to deliver rate cuts this year to boost GDP growth at the cost of currency stability. The recent stock market crash and potential downgrades by MSCI Inc. and Moody’s Ratings have also hurt the rupiah. Meanwhile, BI has maintained its projection for GDP growth in 2026 and continues to expect inflation to be within target this year, deeming both a cut and a hike to the BI-Rate unwarranted.

Panelists expect renewed cuts ahead: Most of our panelists expect rate cuts to resume this year after a pause that started in October last year, with the BI-Rate seen at a five-year low by end-2026. Inflation should average within target, and the rupiah should begin appreciating against the USD from Q3, making room for rate cuts. Still, a minority of panelists sees BI on hold until end-2026, likely due to a persistently weak rupiah. BI will reconvene on 16–17 March.

Panelist insight: ANZ’s Krystal Tan commented: “Overall, while BI still signals an easing bias, the bar to cut is high. Our forecast for a modest 25bp rate cut in 2026 hinges on sustained FX stability, a durable return of inflows, and the Fed resuming cuts, but risks skew toward a more cautious hold-for-longer stance.” Nomura’s Euben Paracuelles and Yiru Chen said: “We maintain our forecast of BI delivering a total of 50bp in rate cuts this year to 4.25%, but after flagging the risk of a delay in recent weeks, we push out the timing of these cuts to June and September, instead of March and June. This puts our forecast in sync with our US economics team’s forecast of Fed cuts in the same months and no more rate cuts under Chair Powell.”

How should you choose a forecaster if some are too optimistic while others are too pessimistic? FocusEconomics collects Indonesian interest rate projections for the next ten years from a panel of 28 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts and averaged to provide one Consensus Forecast you can rely on for each indicator. By averaging all forecasts, upside and downside forecasting errors tend to cancel each other out, leading to the most reliable interest rate forecast available for Indonesian interest rate.

Download one of our sample reports to visualize what a Consensus Forecast is and see our Indonesian interest rate projections.

Want to get access to the full dataset of Indonesian interest rate forecasts? Send an email to info@focus-economics.com.