Indonesia’s Central Bank Cuts Rates for Fourth Time

By Gayatri Suroyo and Fransiska Nangoy

JAKARTA (Reuters) – Indonesia’s central bank cut rates on Wednesday for the fourth time since September, indicating that a revised tariff deal with the United States is beneficial for Southeast Asia’s largest economy amid dwindling global trade and domestic demand.

Bank Indonesia (BI) reduced the benchmark 7-day reverse repurchase rate by 25 basis points to 5.25%, as anticipated by a slight majority of economists surveyed by Reuters, and also adjusted two other critical rates.

Governor Perry Warjiyo stated that the central bank will keep monitoring potential for further rate cuts, citing expectations of low inflation through 2026, a stable rupiah, and a grim global economic outlook.

> “BI is already all out in boosting economic growth, including in supporting loan growth,” the governor emphasized at a press conference.

Analysts noted that President Donald Trump’s announcement of a tariff deal on Tuesday provided an additional impetus for BI to relax monetary policy.

> “External caution was counterbalanced by the fresh news over the trade deal,” commented DBS Bank senior economist Radhika Rao.

> “Policymakers have been opportunistic this year, prudently tapping periods of market stability to lower rates, with the latest move also coming against the backdrop of the successful completion of a trade deal with the U.S.”

The central bank expressed its approval of the trade deal, where Indonesian exports would be subject to a 19% tariff instead of the proposed 32% rate by Washington, according to Warjiyo.

He characterized the deal as a favorable change that would bolster exports and improve broader economic prospects, maintaining the GDP growth forecast for 2025 in the range of 4.6% to 5.4%.

Warjiyo expressed optimism regarding Indonesia’s export outlook following the U.S. tariff revision.

> “This deal will of course increase imports, but in our view, these are imports for productive purposes, which will in turn increase economic growth going forward,” he explained, mentioning that the certainty from the decision will aid business decision-making and enhance prospects for capital inflows.

Weak household spending has led to a slowdown in Indonesia’s growth in the first quarter, and the outlook for the coming quarters is uncertain due to the effects of U.S. tariffs on global trade.

During its easing cycle since September, BI has paused between rate cuts to manage volatility in the rupiah linked to Trump’s trade policies and geopolitical tensions, even as Indonesia’s inflation has remained low.

The rupiah, remaining stable this month, showed little reaction to BI’s announcement, while the main stock index rose nearly 1%.

Brokerage Mandiri Sekuritas predicts another 25-basis point cut later this year and an additional 50 basis points in the first quarter of 2026 to combat declining economic activity, according to economist Rangga Cipta.

> “BI maintained a dovish tone, emphasizing the need to support economic growth,” he added.