Indonesia Central Bank Cuts Rate to 5% Amid Growth Concerns

In a surprise move on August 20, 2025, Indonesia's central bank, Bank Indonesia (BI), cut its benchmark 7-day reverse repurchase rate by 25 basis points to 5.00%, marking the fifth rate cut since September 2024 and the lowest level since late 2022. This decision came despite most economists expecting BI to hold rates steady, given recent economic data showing inflation edged higher to 2.37% in July and GDP growth for the second quarter surpassed expectations at 5.12%. Prior to the cut, polls indicated a majority of economists anticipated a pause in the easing cycle to assess the impact of earlier rate reductions and recent inflation upticks, as loan growth remained sluggish despite cumulative cuts totaling 100 basis points. Economists highlighted the slow transmission of policy rate cuts to credit demand, suggesting a cautious approach might be warranted to ensure effectiveness before further easing. Looking ahead, many economists expect BI to maintain the 5.00% rate through the remainder of 2025, with some anticipating possible modest further cuts by year-end. The rate cut reflects BI's effort to support Indonesia's economy amid global uncertainties while balancing inflation and growth dynamics.