Bank Indonesia leaves rates unchanged in December

BI holds for third straight meeting: At its meeting on 16–17 December, Bank Indonesia (BI) decided to maintain the BI-Rate at 4.75%. The hold was the third in a row, after BI had reduced the BI-Rate by 150 basis points in the year to September 2025. The decision was expected by a slight majority of analysts.

Rupiah stability drives hold again: The Central Bank's decision to hold instead of cutting was aimed at shoring up the rupiah—one of Asia’s weakest currencies vs the USD this year. Meanwhile, the Central Bank ruled out a rate hike given within-target inflation in November plus its goal of strengthening domestic demand, whose growth eased in Q3 from Q2 amid slowing exports.

Rate cuts to resume in 2026: BI indicated that it would consider resuming rate cuts in the future to boost economic growth. Our panelists foresee rate cuts commencing in Q1 and the BI-Rate ending 2026 25–100 basis points below current levels. Still, December’s decision to hold might prompt those of our panelists that predicted a cut to revise their projections in the near term. Weaker-than-expected GDP growth and a stronger-than-expected rupiah pose downside risks to the policy rate. BI is set to reconvene on 20–21 January.

Panelist insight: Nomura’s Euben Paracuelles and Yiru Chen said: “We maintain our forecast that BI will cut its policy rate by an additional 50bp in this cycle to 4.25%, consistent with BI’s dovish tone, though the timing of these cuts remains uncertain and contingent on the external backdrop becoming more favourable. For now, we pencil in BI delivering 25bp cuts at each of the March and June 2026 meetings, when our FX strategists forecast a more stable to slightly weaker USD.” ANZ’s Krystal Tan said: “Overall, BI’s policy guidance remained conditionally dovish. BI continues to see scope for further easing in 2026, contingent on inflation, IDR stability and the growth outlook. For our part, we think BI’s 2026 growth forecast of 4.9-5.7% is on the optimistic side and underwhelming growth will keep BI’s easing bias intact. We are keeping our terminal policy rate forecast at 4.25%, but now expect it to be reached in Q2 2026 rather than Q1 2026.”

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