Bank Indonesia Lowers Benchmark Interest Rate to 5.50% to Stimulate Economic Growth

Bank Indonesia (BI) has officially lowered its benchmark interest rate by 25 basis points to 5.50%, marking its first rate cut since January. The move signals a shift toward more accommodative monetary policy as the central bank seeks to support economic growth amid rising global uncertainties and moderating inflation pressures. Alongside the benchmark rate adjustment, BI also cut the deposit facility rate to 4.75% and the lending facility rate to 6.25%. These changes are designed to provide greater liquidity in the banking sector and stimulate credit activity, particularly within domestic industries. Governor Perry Warjiyo explained that the rate cut aligns with the bank’s dual objective: maintaining rupiah stability while boosting domestic demand. Inflation remains within the target corridor of 2.5% ±1%, giving the central bank flexibility to adjust its policy stance without endangering price stability. The decision comes in response to slower-than-expected economic growth, with Indonesia’s Q1 GDP expanding only 4.87% year-on-year — the slowest pace in over three years. The weakening in growth was attributed to soft global demand and cautious private spending. Bank Indonesia now aims to support recovery by easing borrowing costs and encouraging investment and consumption. Market analysts welcomed the rate cut as a timely intervention. Many view it as a positive signal for the financial markets, with potential gains in equities and improved investor sentiment. Analysts also forecast that further rate cuts are possible in the coming quarters if inflation remains benign and global financial conditions permit. Bank Indonesia emphasized its continued commitment to macroeconomic stability, signaling that it will carefully monitor both external and internal developments before taking further action.

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