Central Bank extends pause in March

Bank extends pause: At its meeting on 18–19 March, Bank Indonesia (BI) decided to keep the BI-Rate at 5.75%, largely in line with market expectations. The decision marked the second consecutive hold this year.

Currency stability becomes top priority: BI noted that its decision aimed to promote economic growth, ensure inflation remains within its 1.5–3.5% tolerance band, and support the rupiah amid persistently high global uncertainty that led to a recent market selloff. The Bank left its inflation and GDP growth projections unchanged and noted that it sees the rupiah appreciating in the coming weeks.

Cuts to resume in Q2: In its communique, BI stated that it will continue to monitor the outlook for inflation and economic growth when considering future rate cuts based on the strength of the rupiah. The majority of our panelists expect cuts to restart in Q2, and our Consensus is for the BI-Rate to end 2025 about 50 basis points below its current level. A weaker-than-expected rupiah and higher-for-longer U.S. rates pose upside risks to the policy rate. The Bank will reconvene on 22–23 April.

Panelist insight: EIU analysts said: “BI will keep a keen eye on the need to support economic growth, which has moderated recently, while inflation remains within its target range of 1.5-3.5%. However, the rupiah has also been on a weakening trend in recent months. […] We expect this to result in a single and final 25-basis-point cut later in 2025. That said, if the rupiah recovers its value, there is a risk that BI will bring forward its interest-rate cut and/or opt for a greater number of cuts.” Nomura analysts Euben Paracuelles and Nabila Amani maintained their hawkish view: “We maintain our forecast that BI will leave the policy rate unchanged at 5.75% for the rest of the year, underpinned by our view that high external risks are likely to be exacerbated by domestic policy uncertainty, particularly from fiscal concerns, which could keep balance of payments pressures persistent. In our view, the back-to-back decisions of BI to leave the policy rate unchanged suggest that it remains focused on its FX stability mandate.”

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