Central Bank leaves rates unchanged in March

BI remains on hold for sixth meeting in a row: At its meeting on 16–17 March, Bank Indonesia (BI) decided to maintain the BI-Rate at 4.75% for the sixth successive meeting, in line with market expectations.

Iran war weighs on outlook: BI’s hold aimed to stabilize the rupiah exchange rate against the USD amid worsening global conditions due to the war in the Middle East and to bring inflation down to within the 1.5–3.5% target range. BI noted that the Iran war has weakened the outlook for global economic growth due to the impact of energy price shocks on global supply chains and inflation. Depreciatory pressures on the rupiah have also persisted, partly due to rising safe haven demand. Regarding domestic price stability, the Bank continues to see average inflation remaining within target this year, but has raised its projections from its previous assessment due to higher commodity prices.

Panelists raise forecasts for interest rates: BI adopted a more hawkish stance compared to previous meetings, removing a phrase about potential rate cuts from its policy statement. Moreover, at a recent parliamentary hearing, Governor Perry Warjiyo commented that room to lower interest rates is narrowing because of geopolitical shocks. Following upward revisions to their forecasts over the past month, our panelists are now roughly evenly split between those who expect rate cuts and those who see BI standing pat or hiking rates by December. BI is scheduled to reconvene on 21–22 April.

Panelist insight: Nomura’s Euben Paracuelles and Nabila Amani said: “We revise our forecast and now expect BI to leave its policy rate unchanged at 4.75% for the rest of the year, i.e. we remove our forecast of an additional 50bp cuts to 4.25% in June and September. We think BI will remain focused on promoting FX stability, when we see multiple flashpoints that could add to balance of payments (BOP) pressures along the year, including lingering geopolitical tensions in Iran which we have argued will weigh on capital flows. We are not pencilling in rate hikes for now, but the risk will rise if BOP pressures intensify and BI’s reserve adequacy metrics fall more significantly.” EIU analysts kept a more dovish stance: “We expect the central bank to leave policy unchanged for much of 2026 as currency volatility prevents the central bank from lowering interest rates much further. […] BI will nonetheless retain an easing bias as supporting economic growth is prioritised under Mr Prabowo's administration, while consumer price inflation will remain within its target range of 1.5-3.5%. We expect the central bank to make one final rate cut towards the end of 2026, provided global uncertainty and oil prices have partially abated.”

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.