Bank Indonesia Expected to Hold Rates Steady Amid Rupiah Pressure and U.S. Tariff Concerns

Bank Indonesia is set to keep its benchmark interest rate unchanged at 5.75% on Wednesday, according to a Reuters poll of 26 economists, as the central bank aims to stabilize the rupiah amid mounting pressure from U.S. trade policies and domestic fiscal concerns.

The Indonesian rupiah has depreciated over 4% this year, nearing a record low. Economists widely agree that the central bank will refrain from any rate cuts in the near term to avoid further currency weakening. The rupiah’s initial slide was triggered by investor concerns over President Prabowo Subianto’s fiscal spending plans, and more recently by a 32% U.S. tariff on Indonesian imports, currently paused for 90 days.

Indonesia's economy, Southeast Asia’s largest, has maintained consistent 5% growth in recent years. However, Finance Minister Sri Mulyani Indrawati warned that U.S. tariffs could reduce growth by 0.3 to 0.5 percentage points. The country is in active negotiations with Washington to ease trade tensions.

Supporting this cautious stance, the overnight deposit and lending facility rates are also expected to remain steady at 5.00% and 6.50%, respectively. Barclays’ senior regional economist Brian Tan noted the surge in the USD/IDR exchange rate post-Eid, making it unlikely for Bank Indonesia to cut rates this month.

Looking ahead, economists predict a 25 basis point rate cut to 5.50% in Q2 and another to 5.25% in Q3, where it is expected to remain through 2025. However, Moody’s Analytics warned the timing of such moves remains uncertain due to economic headwinds.

The poll also forecasts average inflation at 2.1% this year, rising to 2.7% in 2026, with GDP growth projected at 4.8% in 2025 and 4.9% in 2026.