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[JAKARTA] Bank Indonesia (BI) is maintaining its benchmark interest rate at 5.75 per cent following its latest meeting and putting a pause to its easing cycle. It pledged to work consistently towards keeping inflation under control and to stabilise the rupiah amid global uncertainties.

The central bank’s decision on Wednesday (Feb 19) aligned with the expectations of economists surveyed by Bloomberg.

However, 13 out of 35 economists previously anticipated that the central bank would lower its interest rate again, following the surprise cut in January.

BI also left steady the overnight deposit facility and lending facility rates at 5 per cent and 6.5 per cent, respectively.

Perry Warjiyo, the central bank governor, hinted at the possibility of future interest rate cuts, citing persistently low inflation and BI’s ongoing push to fuel economic growth.

Inflation eased to 0.76 per cent in January, marking the lowest rate since 2000 and falling below the central bank’s target range. 

It forecast that in 2025, South-east Asia’s largest economy will grow between 4.7 and 5.5 per cent year on year.

“However, the timing of any rate cuts must take global dynamics into account,” said Warjiyo, adding that there is limited room for the US Federal Reserve to continue its easing cycle this year.

BI’s decision mirrors that of the Philippine central bank, which unexpectedly held its rate last week. This highlighted a shared effort to shield currencies from the impact of US President Donald Trump’s trade policies.

Lavanya Venkateswaran, senior Asean economist at OCBC, noted that central banks in the region face a challenging environment, with the Fed’s policy direction uncertain and the ongoing impact of Trump’s tariff policies.

This uncertainty is making monetary policy decisions more challenging, particularly for emerging markets such as Indonesia. She anticipates a 25-basis-point rate cut from Indonesia’s central bank later this year.

She added: “The room for further rate cuts by BI is limited, so we expect any rate reductions to be modest. However, the timing of the cut, remains unclear.”

The central bank meeting on Wednesday tracked Indonesia’s recent policy shift, requiring natural resource exporters to keep all foreign exchange earnings onshore for a year, up from the previous requirement of just 30 per cent for three months.

With these new rules, the government and central bank estimate that up to US$80 billion in foreign exchange earnings could remain in the country.

Michael Wan, senior currency analyst at MUFG, said that if this move helps to stabilise the rupiah, it could provide BI with the policy space needed to consider cutting rates later this year.

The rupiah, a cornerstone of the central bank’s policy decisions, fell to its lowest point in early February. It breached the 16,440 rupiah per US dollar mark, as the ripple effects of Trump’s tariff announcement on US trading partners took their toll.

Indonesia is currently struggling to break through the 5 per cent economic growth stagnation that it has experienced over the past decade, with President Prabowo Subianto aiming to raise it to 8 per cent within the next five years. The country faces a growing challenge in the form of waning consumer demand.

Central bank governor Warjiyo stated that the central bank will continue its Macroprudential Liquidity Incentive Policy to further encourage bank lending to priority sectors for growth and job creation.

This policy includes providing liquidity support to banks that extend credit to support President Prabowo’s programme, which aims to build three million homes annually for low-income households.