Jakarta. Bank Indonesia cut its benchmark interest rate by 25 basis points to 5.5 percent during its Board of Governors Meeting held on May 20–21, marking its first rate cut since January. The central bank also cut the Deposit Facility rate to 4.75 percent and the Lending Facility rate to 6.25 percent.

Governor Perry Warjiyo said the decision is aligned with the outlook for low and stable inflation within the 2.5 percent ±1 percent target band for both 2025 and 2026. 

"Bank Indonesia will continue to calibrate monetary policy to ensure inflation remains on target and the exchange rate stays stable, while closely monitoring space to further support economic growth," Perry said during a virtual press conference on Wednesday.

The move follows a four-month hold at 5.75 percent. BI last reduced its key rate in January 2025, from 6 percent to 5.75 percent.

Bank Mandiri Chief Economist Andry Asmoro had earlier forecast a 25-basis-point cut in BI’s May meeting, citing space for easing if the rupiah remained relatively stable.

He said that while the rupiah has faced some pressure, the volatility is milder than in the first quarter of the year, offering BI room to ease policy without risking currency instability.

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