Bank Indonesia leaves rates unchanged in November

Second consecutive hold as expected: At its meeting on 18–19 November, Bank Indonesia (BI) decided to hold the BI-Rate at 4.75%, mirroring October’s pause and aligning with market expectations.

BI stands pat to support domestic currency: BI opted to keep rates steady to support the rupiah and bolster portfolio inflows, ruling out a rate cut. Meanwhile, within-target inflation and a sluggish domestic economy likely dissuaded a rate hike.

Rate cuts to resume as early as December: The Bank indicated it will continue considering room for further BI-Rate reductions, with inflation forecast within the target corridor for 2025 and 2026, and the need to support economic growth. Most of our panelists see a 25 point cut in December, while a minority expects either larger cuts or the Bank holding rates. The majority also anticipates additional rate reductions in the first half of 2026. That said, the size and timing of BI’s moves will depend on the U.S. Fed, as BI remains determined to support the rupiah amid global economic and trade uncertainty, thereby closely monitoring the rate differential with the Fed. The Bank will reconvene on 16–17 December.

Panelist insight: Nomura analysts commented on the outlook: “We think BI’s tone was still dovish, with BI guiding that it has room to lower rates further, citing on-target inflation and growth remaining below potential, in line with our view. In addition, we continue to expect BI to provide liquidity support measures, as part of efforts to improve policy transmission. We continue to think BI will deliver 25bp cuts at each of the December 2025 and March 2026 meetings, but flag the risk that the next cut in December could be delayed given our US economics team’s forecast of a pause by Fed next month.” ING’s Deepali Bhargava said: “Real rate differentials between Indonesia and the US have narrowed, adding pressure on the rupiah. Currency weakness could persist given its high sensitivity to rate gaps and our expectation of another 50bp rate cut by Bank Indonesia this cycle. Foreign investor appetite for Indonesian debt has also weakened. […] While our base case assumes that BI will cut rates in December to support growth, risks remain skewed toward a delay if IDR stays under pressure, or if the Federal Reserve postpones its own rate cuts beyond December.”

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