Citi Indonesia Expects Bank Indonesia to Cut Benchmark Rate to 4.25% This Year

4 hours ago 6

October 27, 2025 | 01:50 pm

TEMPO.CO, Jakarta - Citi Indonesia predicts that Bank Indonesia (BI) will cut the benchmark interest rate to 4.25 percent this year. Throughout this year, BI has cut the interest rate five times, albeit deciding to maintain the rate at 4.75 percent last week.

"We predict that Bank Indonesia will cut the benchmark interest rate to 4.25 percent. Meaning, there will be two more cuts until year end," said Chief Economist Citi Indonesia Helmi Arman at the Citi Data Centre Day event at The Langham, Jakarta, on Monday, October 27, 2025.

According to Helmi, Bank Indonesia still has room to lower the benchmark interest rate, since the United States Federal Reserve (The Fed) decided to make cuts last September. Helmi said this has reduced pressure on the rupiah exchange rate.

Bank Indonesia Governor Perry Warjiyo earlier said there is still room to cut the interest rate, citing low inflation rate as one of the reasons. "Inflation this year and next year remains low, especially core inflation, which is stable within the 2.5 percent ±1 percent range," Perry said in a virtual press conference on Wednesday, October 22, 2025.

Another reason Perry mentioned was the central bank and the Indonesian government's move to synergize economic growth improvement. According to him, the current growth is still below the national output capacity, with the second quarter of 2025 posting 5.12 percent growth.

Additionally, Perry said Bank Indonesia is currently focusing on strengthening the effectiveness of the interest rate reduction policy transmission. This is because the transmission of cutting the benchmark interest rate to the banking credit interest rate is still slow.

Since September 2024, BI has reduced the benchmark rate by 150 basis points. Yet, the transmission has been sluggish. The one-month deposit rate fell by only 29 bps, from 4.81 percent in early 2025 to 4.52 percent in September 2025.

Editor’s Choice: Two Reasons Bank Indonesia Still Has Room to Cut Interest Rates

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