Indonesia Central Bank Chief Sees Room for Another Rate Cut

Source: Reuters | Editor: Yudho Winarto

BANK INDONESIA / BI - JAKARTA. Indonesia's central bank governor said on Monday there was still room for another interest rate cut, but the timing would depend on rupiah stability and the effectiveness of previous rate reductions in Southeast Asia's largest economy.

Bank Indonesia (BI) maintained its policy rate at 4.75% late last month despite market expectations for a fourth straight cut.

It said it would prioritise improving policy transmission, underscoring a tepid response to stimulus measures and slow credit uptake in the $1.4 trillion economy.

"In terms of inflation and supporting economic growth, the answer is yes there's room for further rate cuts," BI Governor Perry Warjiyo said at a press conference held by the Indonesia Stability Board in Jakarta.

He did not give a timeframe for the cuts. The annual inflation rate rose to 2.86% in October, official data from the statistics bureau showed on Monday, above the 2.65% median forecast by economists in a Reuters poll, but within the target range set by Bank Indonesia of 1.5% to 3.5% for 2025 and 2026.

BI has lowered its benchmark rate by 150 basis points since September last year at a time the government of President Prabowo Subianto is making a push to boost economic growth from around 5% closer to his target of 8%.

Warjiyo said he believed Q3 2025 growth would be stronger than the 5.12% registered in the previous quarter, and Q4 would be stronger still.

Indonesia will officially release its Q3 GDP data on November 5. Indonesia's statistics bureau reported a trade surplus of $4.34 billion in September, lower than the $4.79 billion forecast by economists, as both exports and imports came in above expectations.

Analysts predict a growth push by the government would lead to a narrowing of the trade balance as import growth outpaces exports.

"As the government advances its pro-growth agenda through investment-led initiatives, import activity is expected to gradually strengthen," Bank Permata economist Faisal Rachman said in a note.

Rachman added the current account deficit was still projected to widen moderately to 0.81% of gross domestic product in 2025, which should allow BI to sustain monetary easing.

But Rachman highlighted the downside risk of imports rising sharply due to pro-growth initiatives.

Indonesian Finance Minister Purbaya Yudhi Sadewa, speaking alongside Warjiyo, said the government was maintaining its 5.2% growth forecast for 2025.