Jakarta. Bank Indonesia (BI) has cut its benchmark interest rate by 25 basis points to 5.25 percent in a move to support sustainable economic growth while maintaining rupiah stability amid global uncertainty.

The central bank also lowered the Deposit Facility rate to 4.5 percent and the Lending Facility rate to 6 percent following its board of governors meeting on July 15-16.

“This decision aligns with our low and controlled inflation outlook within the 2.5 percent target for 2025-2026 and efforts to maintain rupiah stability while boosting economic growth,” BI Governor Perry Warjiyo said during a virtual press conference on Wednesday.

Perry said there is further room to lower rates to support the economy if needed, while closely monitoring global and domestic developments.

The move marks the second rate cut this year, following a reduction from 5.75 percent to 5.5 percent in May after BI had kept rates steady for four months.

Indonesia’s economy is projected to grow between 4.6 and 5.4 percent in the second half of 2025, supported by stronger domestic demand and steady export performance following a tariff deal with the United States. The country recorded 4.87 percent growth in the first quarter of 2025.

On Tuesday, US President Donald Trump announced plans to slash the previously threatened 32 percent tariffs on Indonesian goods to 19 percent. In exchange, Indonesia agreed to provide tariff-free access for US goods and committed to purchasing $15 billion worth of American energy products, $4.5 billion in agricultural goods, and 50 Boeing aircraft, including Boeing 777 wide-body jets.

Trimegah Sekuritas Chief Economist Fakhrul Fulvian said BI’s rate cut was timely as domestic inflation remains under control and the global focus shifts toward supporting growth amid slowing US and European economies.

“Other regional economies like India and Malaysia have already lowered rates. It’s time for Indonesia to do the same, shifting focus to growth while maintaining rupiah stability,” Fakhrul said.

He projected the rupiah could strengthen to Rp 15,500 by year-end, supported by improved economic expectations driven by both monetary and fiscal policy momentum.

Globally, BI expects growth to remain weak at around 3 percent in 2025, citing the impact of US reciprocal tariffs on major and emerging economies. The US, Europe, and Japan are seeing slower growth despite fiscal stimulus and monetary easing, while China’s recovery remains fragile amid export diversification efforts. India, however, is expected to maintain solid growth driven by domestic demand.

Easing US inflation pressures have strengthened expectations for future Federal Reserve rate cuts, while rising risks in the US economy have driven capital flows toward Europe, emerging markets, and safe-haven assets such as gold, contributing to a weaker dollar.

“Stronger vigilance and coordinated policy responses are needed to mitigate global market uncertainty while ensuring domestic stability and supporting economic growth,” Perry said.

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