Bengaluru: Bank Indonesia (BI) is set to reduce its benchmark interest rate for the fourth consecutive meeting, lowering the seven-day reverse repurchase rate to 4.50%, as policymakers prioritize economic growth despite ongoing weakness in the rupiah, according to a Reuters poll of economists.
Last month, BI surprised markets with a rate cut, with Governor Perry Warjiyo stating the central bank was going “all out” to support growth while ensuring financial market stability. The rupiah has recovered slightly in recent weeks through currency market interventions, but remains roughly 3% weaker year-to-date. Maintaining currency stability remains a core mandate for the central bank.
Although Indonesia’s second-quarter economic growth exceeded expectations, analysts have noted signs of slowing domestic demand. Vehicle sales have declined, consumer confidence has weakened, and export growth has moderated. Combined with inflation at 2.65% within BI’s target range of 1.5% to 3.5% these factors have strengthened expectations for another rate cut this week.
The Reuters poll conducted from October 13–20 found that 21 out of 28 economists anticipate a 25 basis point reduction in the key policy rate, while the remainder expect it to remain at 4.75%. Overnight deposit and lending facility rates are also likely to be trimmed by 25 basis points to 3.50% and 5.25%, respectively. Median forecasts suggest the key policy rate could end the year at 4.25% and remain at that level through 2026.
While BI appears set to continue monetary easing, economists have expressed concerns about the central bank’s independence amid recent political pressures, including a burden-sharing agreement and draft legislation increasing parliamentary oversight of BI. Analysts warn that overly aggressive easing could risk overheating the economy, leading to higher inflation and long-term growth challenges.
Indonesia’s economy is projected to expand by around 5% annually through 2027, below President Prabowo Subianto’s ambitious 8% target but in line with recent trends. Inflation is expected to average 1.8% this year and rise to approximately 2.5% in 2026 and 2027, reflecting the central bank’s cautious approach to balancing growth support with price stability.