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View all search resultsBank Indonesia has kept its benchmark interest rate in place after decreasing it by 25 basis points (bps) in each of the past three months, but the central bank is open for further cuts to encourage lending and push economic growth to its true potential.
The House of Representatives is seeking to expand Bank Indonesia’s (BI) mandate to include economic growth and job creation, which analysts warn could conflict with monetary policy goals and motivate political interference.
Bank Indonesia (BI) cut its benchmark interest rate for the fifth time this year, lowering it to 4.75 percent just a day before the United States Federal Reserve (the Fed) announcement. The move reflected BI’s bet that the US monetary authority would also ease its policy. A day later, the Fed indeed cut the federal funds rate (FFR) for the first time in 2025. Both central banks’ decisions were driven by concerns over slowing economic growth but also sparking debate on government influence in central bank decisions.
Bank Indonesia (BI) and the Finance Ministry have announced another burden-sharing arrangement through Indonesian government securities (SBN), a mechanism typically reserved for easing the government’s fiscal burden during crises, even though no national crisis has been declared. Part of the proceeds will finance priority programs, continuing the central bank’s financial backing of government initiatives. Economists warn, however, that the policy risks undermining economic stability and BI’s independence.
Bank Indonesia's rate cut this week stunned markets for all the wrong reasons - investors fear the central bank is bowing to pressure from President Prabowo Subianto to juice the economy, compromising its independence and risking a rupiah sell-off.
Concerns about the independence of the central bank have been mounting following the announcement of a "burden sharing" deal that will see BI increase the interest it pays on government deposits to fund state programs.
Bank Indonesia’s second consecutive rate cut in August, and its third this year, reflected both domestic headwinds and shifting global dynamics. The central bank lowered its benchmark rate by 25 basis points to 5 percent, just a week before the U.S. Federal Reserve signaled a dovish turn. That shift further expanded the policy space for emerging markets like Indonesia to ease monetary conditions. For the Prabowo administration, the decision offers timely support for its ambitious growth agenda.
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