TEMPO.CO, Jakarta - Bank Indonesia (BI) has decided to lower the benchmark interest rate, or BI Rate, from 5.50 percent to 5.25 percent. This decision was agreed upon at the Bank Indonesia Board of Governors Meeting (RDG) held on July 15, 2025.
This BI Rate cut is the third time in 2025. In January, the benchmark interest rate decreased from 6 percent to 5.75 percent. Then, in May, BI again lowered the benchmark interest rate to 5.5 percent.
"Based on the assessment of prospects and the various risks anticipated in the future, the BI RDG on July 15-16, 2025, decided to reduce the BI Rate by 25 basis points to 5.25 percent," said BI Governor Perry Warjiyo in a virtual press conference on Wednesday, July 16, 2025.
The BI also reduced the interest rate on deposits to 4.5 percent, down from 4.75 percent. The interest rate on the lending facility dropped from 6.25 percent to 6 percent.
Perry stated that three reasons are driving the decrease in the BI Rate. First, BI anticipates that inflation in 2025 and 2026 will remain low within the target of 2.5 plus or minus 1 percent. Second, the stable exchange rate of the rupiah is expected to remain stable.
Third, the reduction in the benchmark interest rate aligns with efforts to stimulate economic growth. The government itself has predicted that Indonesia's economic growth will be in the range of 4.7-5 percent in 2025.
Previously, economist Wijayanto Samirin from Paramadina University assessed that Bank Indonesia needs to lower the benchmark interest rate. He said that both the public and the business world are waiting for the benchmark interest rate to be lowered to stimulate the economy. "In the current situation, ideally, BI should take more risks to boost economic growth," said Wijayanto when contacted by Tempo on Saturday, July 12, 2025.
Manulife Investment Management also sees room for a reduction in interest rates in ASEAN countries, including Indonesia, to provide an economic growth boost due to the impact of U.S. tariffs. "This reduction will drive the performance of domestic bonds in those countries," said Head of Asia ex-Japan Fixed Income Manulife Investment Management, Murray Collis, in an official statement on Friday, July 11, 2025.
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