Bank Indonesia (BI) has once again decided to keep its benchmark interest rate unchanged at 4.75% at the Board of Governors’ Meeting held on December 16–17, 2025. The deposit facility rate was also maintained at 3.75%, while the lending facility rate remained at 5.50%. 

“This decision is consistent with efforts to maintain rupiah exchange rate stability amid persistently high global uncertainty,” BI Governor Perry Warjiyo said during the December 2025 Monthly Board of Governors’ press conference in Jakarta on Wednesday, December 17. 

Perry emphasized that the policy stance was taken while continuing to strengthen the effectiveness of monetary and macroprudential easing transmission that has been implemented so far. In addition, the central bank aims to safeguard stability and support national economic growth. 

According to Perry, the global economy has shown slight improvement in the short term, although uncertainty remains elevated. “With high uncertainty, global economic growth in 2025 is projected at 3.2%,” he said. 

He explained that the United States economy is expected to continue slowing in 2025 due to the impact of a government shutdown and weakening labor market conditions. Meanwhile, China’s economic outlook is also expected to decelerate further as domestic demand remains weak. 

In 2026, Perry projected that global economic growth would weaken to 3%. “This is influenced by the continued impact of reciprocal tariffs imposed by the United States and vulnerabilities in global supply chains,” he said. 

As a result, global economic uncertainty going forward is expected to remain high, while the outlook for global growth continues to be subdued. 

Such conditions require heightened vigilance and stronger policy responses. “This is necessary to strengthen domestic economic resilience against global spillover effects and to encourage higher growth at home,” Perry said. 

Potential Inflation Pressures and Global Risks 

The Institute for Economic and Social Research, Faculty of Economics and Business, University of Indonesia (LPEM FEB UI) stated that BI still needs to maintain its interest rate at 4.75%. LPEM FEB UI macroeconomics and financial markets economist Teuku Riefky said this is due to the potential for rising inflation toward year-end. 

Inflation slowed from 2.86% year-on-year in October 2025 to 2.72% in November 2025. However, Riefky noted that the year-end holiday period could add inflationary pressure. 

On the other hand, although the rupiah has tended to strengthen in recent weeks, Riefky said exchange rate movements remain volatile, with room still available for further rupiah stabilization. 

Considering recent developments in inflation and the exchange rate, Riefky said that a rate cut by Bank Indonesia could risk triggering higher inflationary pressures and potentially lead to rupiah depreciation. 

Meanwhile, Permata Bank Chief Economist Josua Pardede said global investors remain in a risk-off stance and continue to adopt a wait-and-see approach. “This has an impact on capital flows, which in turn affects rupiah movements that are currently in a sideways trend,” Josua said. 

Weakening regional data across the Asia-Pacific region, particularly from China, have also added to the risks facing Indonesia’s economic outlook. However, Josua noted that Indonesia’s economic fundamentals remain relatively solid. 

This article is published in partnership with Katadata 

Original article here