BI Loosens Policies But Deposit Interests And Loans Haven't Come Down Quickly

Bank Indonesia (photo: dock. Antara)

BUKITTINGGI - Bank Indonesia (B) has lowered the benchmark interest rate or BI-Rate by 150 basis points (bps) since last year. Thus, BI-Rate is now at the level of 4.75 percent, which is the lowest position since 2022.

Director of the BI's Department of Economic Policy and Monetary, Budi Winantya, said that the impact of easing monetary policy and increasing liquidity has begun to appear in the money market.

The interbank overnight or INDONESIA (Indonesia Overnight Index Average) interest rate fell by around 204 basis points on October 21, 2025, to 3.99 percent, from 6.03 percent at the beginning of the year.

For instruments with longer tenors, such as the Bank Indonesia Rupiah Securities (SRBI) with a future of 6, 9, and 12 months, each also decreased by 251 bps, 254 bps, and 257 bps, so that now it is at the level of 4.65 percent, 4.67 percent, and 4.70 percent as of October 17, 2025.

"The decline in interest rates is also seen in the financial market. Yield's State Treasury Letter (SPN) for two years fell from 7.26 percent to 4.78 percent, while the 10-year tenor fell from 7.26 percent to 5.94 percent," he said in BI journalists' training, Friday, October 24.

However, July acknowledged that the decline in banking interest rates was still running slower than the response of the money market and financial markets.

Compared to the 50 bps BI-Rate decline, the 1 month deposit rate only fell by 29 bps, from 4.81 percent in early 2025 to 4.52 percent in September 2025. This condition is influenced by the existence of a special rate for large deposits which covers about 26 percent of the total third party funds (DPK) in banking.

Meanwhile, bank credit interest rates fell even later, only 15 bps, from 9.20 percent at the beginning of the year to 9.05 percent in September 2025.

Previously, BI Governor Perry Warjiyo explained that the opportunity to return to lower interest rates was still open, taking into account the inflation conditions this year and the 2026 inflation projection which remained 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, he 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.