BI Values That The Lowering Room For Interest Rates Is Still Open Until The End Of 2025

JAKARTA - Bank Indonesia (BI) assesses that there is still room large enough to lower the benchmark interest rate or BI-Rate until the end of 2025.

As is known today, BI-Rate will remain at the level of 4.75 percent in October 2025 and so far this year, BI has lowered the benchmark interest rate five times, each at 25 basis points in January, May, July, August, and September. Thus, the benchmark interest rate fell from 6.00 percent in December 2024 to 4.75 percent today.

BI Governor Perry Warjiyo explained that the opportunity to return to lower interest rates is still open, considering the inflation conditions this year and the 2026 inflation projection which remains low and stable in the target range of 2.5 percent plus minus 1 percent.

"And therefore, with controlled inflation, there is an open space for lower interest rates," Perry said at a press conference, Wednesday, October 22.

In addition to inflation, he conveyed that the policy of easing interest rates was also aimed at encouraging national economic growth.

According to Perry, BI continues to strengthen synergies with the government to increase economic activity which is currently still below the potential for national output capacity.

Perry said the push for domestic demand was still in line with efforts to maintain price stability, especially core inflation, so that economic growth could increase without causing excessive inflationary pressure.

In addition to the interest rate policy, he said BI also continues to expand liquidity expansion and provide liquidity incentives, both at the macro level and through the digitization of the financial system.

Perry emphasized the importance of fiscal and monetary policy synergy to achieve sustainable economic growth while maintaining stability.

"These two considerations are low inflation and the need to synergize to encourage growth is the main basis. We still view that the space for lower interest rates is still open," he explained.

However, he said that after a series of cuts in interest rates this year, BI's focus has now shifted to strengthening the effectiveness of monetary policy transmission.

Perry added that the BI-Rate decline had been followed by a reduction in interest rates in the money market and also a yield of Government Securities (SBN).

Even so, he admitted that the reduction in third-party interest rates (DPK) and credit was still running slowly.

Therefore, Perry said BI would continue to encourage credit interest rates to decline faster in order to support economic expansion and strengthen the transmission of monetary policy.