(Bloomberg) — Indonesia’s central bank kept its key interest rate unchanged for a second straight month, seeking to safeguard the rupiah after concerns about the economy’s outlook triggered a market selloff this week.
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Bank Indonesia kept the BI-Rate at 5.75% on Wednesday as predicted by most of the economists in a Bloomberg News survey. The central bank also maintained its 2025 economic growth forecast at 4.7%-5.5% and kept its inflation target at 1.5%-3.5%.
The decision comes a day after a stock market meltdown that was fueled by a combination of domestic factors — from President Prabowo Subianto’s economic policies to a worsening fiscal outlook. A key factor was fear that veteran Minister of Finance Sri Mulyani Indrawati would resign, a rumor she allayed late Tuesday afternoon.
“Going forward, Bank Indonesia continues to monitor the prospects for inflation and economic growth in terms of considering further room for monetary easing based on rupiah exchange rate movements,” Governor Perry Warjiyo said Wednesday.
The market selloff triggered trading halts that were last seen in 2020 during the pandemic, prompting BI to actively intervene in the markets to stem the rupiah’s volatility.
The rupiah extended losses to 0.6% against the dollar after the decision. Stocks maintained gains at 1.5% while the 10-year government bond yield rose further to 7.07%.
The rate pause indicates the central bank remains vigilant on the currency amid growing uncertainties both at home and abroad. The rupiah has lost more than 1% against the dollar over the past month and is the worst performer in Asia, despite the US currency’s broader weakness.
Read: Indonesia Finance Chief Dispels Resignation Talk as Stocks Slump
Warjiyo said Wednesday’s decision was consistent with efforts to keep the 2025 and 2026 inflation forecast under control, maintain the stability of the rupiah and support economic growth. The rupiah remains manageable and is expected to be stable going forward, he added.
The governor last month signaled that there was still room for further monetary easing to support economic growth, noting that it was only a matter of time. However, the heightened risk of capital outflows amid the looming threat of US tariffs, plus uncertainty over the Federal Reserve’s policy path may be holding back the central bank from resuming rate cuts too soon.
