Bank Indonesia Holds Rates at 4.75% to Defend Rupiah

Bank Indonesia (BI) held its benchmark interest rate steady at 4.75% on Dec. 17, 2025. This marks the third consecutive meeting with no change to the 7-day reverse repurchase rate. The decision also left the overnight deposit and lending rates unchanged at 3.75% and 5.50%, respectively. The move came amid persistent pressure on the rupiah and ongoing global market uncertainty.

Governor Perry Warjiyo said at a press briefing that the unchanged rate aligns with efforts to maintain currency stability as the central bank assesses the effects of previous monetary easing. BI cut its policy rates by 150 basis points between September 2024 and September 2025 to support growth in Southeast Asia’s largest economy. Despite that, the rupiah has remained one of emerging Asia’s weakest currencies against the U.S. dollar this year.

BI forecasts economic growth of 4.9% to 5.7% in 2026, up from an expected 4.7% to 5.5% in 2025. Warjiyo reiterated that the central bank has room for further easing next year if inflation stays low and other conditions permit. Inflation in November was 2.72%, comfortably within BI’s 1.5% to 3.5% target range.

Focus on Rupiah Stability

Bank Indonesia made clear that its immediate priority remains stabilizing the rupiah, rather than cutting interest rates further. Global market volatility and external risks have weighed on the currency, prompting BI to emphasize interventions in both domestic and offshore markets to defend the exchange rate.

The weak rupiah has implications for trade and investor sentiment, given Indonesia’s reliance on imports for certain goods and debt servicing. To increase domestic U.S. dollar supply, the government plans to revise export earnings rules, forcing exporters to hold dollars onshore longer. This policy move aims to reduce downward pressure on the rupiah by keeping more foreign currency within the domestic financial system.

Economists caution that while there is scope for rate cuts, rupiah volatility may limit the extent of future easing. Some forecasts suggest cumulative cuts of no more than 50 basis points through 2026 if currency pressures persist.

Beyond interest rates, BI is expanding liquidity in financial markets and adjusting incentives to encourage banks to lower lending rates. Banks that cut lending rates more aggressively may receive greater reductions in required reserves. This tool aims to boost credit flow to businesses and households without altering the policy rate.

The broader monetary strategy reflects a balance between growth and stability. With inflation controlled and growth forecasts positive, BI maintains flexibility. However, persistent exchange rate pressure means policymakers are cautious about committing to deeper rate cuts without data supporting long-term currency resilience.