IDR: Policy on hold as BI defends currency – ING

ING’s Deepali Bhargava notes that Bank Indonesia (BI) kept its policy rate at 4.75%, focusing on Indonesian Rupiah (IDR) stability rather than tightening. With fuel subsidies containing inflation and Consumer Price Index (CPI) expected to stay within target, the bank is seen relying on non-rate tools. ING expects rates to remain unchanged through the third quarter, with potential for cuts by year-end.

Bank Indonesia prioritises rupiah stability

"Bank Indonesia left its policy rate unchanged at 4.75%, in line with expectations, underscoring its priority for maintaining currency stability."

"BI also remains comfortable with inflation as it expects it to remain within the target of 1.5-3.5%."

"As a result, BI is likely to rely on non‑rate tools to manage rupiah stability."

"With growth weakening, the central bank is unlikely to hike and is expected to stay on hold into 2026, limiting monetary support for the currency."

"As such, we continue to expect policy rates to remain unchanged through the third quarter this year, with softening growth potentially opening the door to rate cuts rather than hikes by year‑end."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)