The Bank Indonesia Board of Governors decided on 19-20th August 2025 to lower the BI-Rate by 25 bps to 5.00%, while also lowering the Deposit Facility (DF) rate by 25 bps to 4.25% and the Lending Facility (LF) rate by 25 bps to 5.75%. The decision consistent with the projection of low inflation in 2025 and 2026 within the 2.5±1% target corridor, maintained rupiah exchange rate stability and the need to support economic growth in line with the potential capacity of the economy. Going forward, Bank Indonesia will continue to closely monitor room for further interest rate reductions to support higher economic growth, in line with low inflation outlook, while maintaining Rupiah exchange rate stability. Meanwhile, Bank Indonesia continues optimising loose macroprudential policy to raise lending/financing, lowering interest rates and increasing liquidity in the banking industry in pursuit of higher economic growth. Payment system policy is also oriented towards supporting economic growth by expanding the acceptance of digital payments, while strengthening the structure of the payment system industry and strengthening the resilience of payment system infrastructure.
The direction of the monetary, macroprudential, and payment system policy mix aimed at maintaining stability to support sustainable economic growth is supported by the following policy measures:
- Strengthening the pro-market monetary operations strategy to enhance the effectiveness of the transmission of lower interest rates, increase liquidity, accelerate money market and foreign exchange market deepening and attract foreign capital inflows, through:
- strengthening the effectiveness of the transmission of interest rates reduction by managing the interest rate structure of monetary instruments and forex swaps, while maintaining the attractiveness of foreign portfolio inflows into domestic financial assets;
- increasing liquidity in the money market and banking sector through auctions of Bank Indonesia Rupiah Securities (SRBI) in a measured manner and the purchase of Government Securities (SBN) in the secondary market; and
- enhancing the role of primary dealers to increase SRBI transactions in the secondary market and repurchase agreement (repo) transactions among market participants;
- Strengthening Rupiah exchange rate stabilization strategies in line with fundamentals, particularly through intervention in spot and Domestic Non-Deliverable Forward (DNDF) transactions in domestic markets, as well as Non-Deliverable Forward (NDF) transactions in offshore markets. This strategy is accompanied by the purchase of Government Securities (SBN) in the secondary market to increase liquidity and maintain financial market stability;
- Strengthening the publication of assessments on the transparency of Prime Lending Rates (SBDK), with a more in-depth analysis of lending rates based on the priority sectors covered under the KLM;
- Expanding digital acceptance by: (i) strengthening awareness among users and merchants concerning the implementation of QRIS Cross-Border cooperation with Japan for the outbound Indonesian corridor, (ii) developing QRIS Cross-Border cooperation with Japan for the inbound Indonesian corridor and preparing for the implementation of QRIS Cross-Border cooperation with China, and (iii) expanding implementation of QRIS Tap by increasing digital adoption in various sectors and regions, and
- Strengthening and expanding international cooperation in central banking areas, including by enhancing payment system connectivity and transactions using local currencies, as well as facilitating investment and trade promotion in priority sectors in collaboration with relevant institutions.
Bank Indonesia also continues to strengthen policy synergy with the Government to maintain stability and promote economic growth in line with the Government's Asta Cita development agenda. In addition, Bank Indonesia continues to enhance policy coordination with the Financial System Stability Committee (KSSK) to safeguard financial system stability.
The global economy is weakening in line with the broader implementation of the United States (U.S.) reciprocal tariffs. Since 7 August 2025, the coverage of U.S. reciprocal tariffs has expanded from 44 countries to 70, with higher tariffs imposed on certain countries, such as India and Switzerland, compared to the initial announcement. The implementation of these U.S. reciprocal tariffs poses risks of further weakening global economic growth. The tendency toward weaker growth and declining inflation has prompted most central banks, with the exception of Japan, to adopt accommodative monetary policies. Milder inflationary pressures in the US are strengthening expectations of a future reduction in the Federal Funds Rate (FFR). Nevertheless, in the short term, global financial market uncertainty persists and must continue to be closely monitored to safeguard domestic economic resilience against spillover effects from global developments.
From the domestic front, Indonesia's economic growth in the second quarter of 2025 exceeded projections. Economic growth in the second-quarter of 2025 was recorded at 5.12% (yoy), up from 4.87% (yoy) in the first quarter of 2025. The higher economic growth was supported by investment in line with positive capital investment growth and household consumption as public mobility increased. Exports of goods and services also increased due to the front-loading of exports bound for the US in anticipation of tariffs, alongside a higher influx of inbound international travellers. By sector, all economic activities improved, including Manufacturing, Trade, and Information and Communication. Spatially, economic growth increased across all regions, with Java recording the highest growth..
Indonesia's Balance of Payments (BOP) remains sound, thereby supporting external resilience. In the second-quarter of 2025, the current account deficit is projected to remain low and manageable, bolstered by a goods trade surplus recorded at USD4.1 billion in June 2025 due to exports of natural resources and manufacturing products. In the third-quarter of 2025, portfolio investment inflows to government securities (SBN) have been maintained, with net inflows totalling USD1.0 billion recorded in July and August 2025 (as of 15th August 2025). Positive developments were also observed in the stock market, which began to register net inflows in August 2025, reflecting improved economic prospects in Indonesia and the ongoing trend of declining interest rates. The position of foreign reserves at the end of July 2025 remained high at USD152.0 billion, equivalent to 6.3 months of imports or 6.2 months of imports and servicing government external debt, which is well above the international adequacy standard of around 3 months of imports.
Rupiah exchange rates remain stable and appreciated on the back of Bank Indonesia's stabilization policy and sustained foreign capital inflows. As of 19 August 2025, the Rupiah appreciated by 1.29% (ptp) against the U.S. dollar compared with its end-July 2025 position. This exchange rate development was underpinned by the consistency of Bank Indonesia's stabilization measures and sustained foreign capital inflows, particularly into government securities (SBN), as well as increased conversion of foreign exchange into Rupiah by exporters in line with the Government's strengthened policy on Export Proceeds of Natural Resources (DHE SDA).
Low Consumer Price Index (CPI) inflation was maintained in July 2025, thereby supporting economic stability. CPI inflation in July 2025 was low at 2.37% (yoy), underpinned by lower administered prices (AP) inflation and manageable volatile food (VF) inflation. Core inflation fell to 2.32% (yoy) influenced by monetary policy consistency to anchor inflation expectations to the target corridor, accompanied by low imported inflation and international food prices. VF inflation remained under control at 3.82% (yoy), supported by the adequate supply of key food commodities and close synergy to manage inflation between Bank Indonesia and the Central and Regional Government Inflation Control Teams (TPIP/TPID) through the National Movement for Food Inflation Control (GNPIP). Meanwhile, AP inflation decelerated to 1.32% (yoy).
Bank Indonesia continues optimising pro-market monetary operations strategy to strengthen transmission of the lower BI-Rate to interest rates in the money market and banking industry. BI-Rate reductions totalling 100 bps since September 2024 have been accompanied by lower interest rates in the money market, with further measures required to continue lowering interest rates in the banking industry. In the money market, following the BI-Rate cut in July 2025 and Bank Indonesia's monetary operations, the INDONIA rate continued to decline, from 5.14% prior to the announcement of the July rate cut to 4.78% as of 19 August 2025. The yields on SRBI for 6-, 9-, and 12-month tenors also declined from 5.85%, 5.86%, and 5.87%, respectively, before the July rate cut, to 5.28%, 5.32%, and 5.34% on 15 August 2025. Likewise, yields on 2-year government bonds (SBN) declined from 5.86% to 5.54%, while 10-year yields fell from 6.56% to 6.40%. Similarly, the 1-month term deposit rate began to decline, namely from 4.85% in June 2025 to 4.75% in July 2025. Meanwhile, the decline in bank lending rates has been relatively slow. In July 2025, lending rates in the banking industry stood at 9.16%, relatively unchanged from the previous month. Bank Indonesia views that lending rates need to decline further to encourage increased credit/financing disbursement in support of economic growth.
The pro-market monetary operations strategy continues to be optimized to support increased liquidity in the money market and banking sector. In this regard, the auction volume and outstanding position of SRBI have been gradually reduced. As of 15th August 2025, the position of SRBI was recorded at Rp720.01 trillion, down from Rp916.97 at the beginning of January 2025. To further support liquidity expansion, monetary operations have also been directed toward shorter tenors. The implementation of Primary Dealers (PD) since May 2024 has also increased SRBI transactions in the secondary market along with repurchase agreement (repo) transactions between market players. Meanwhile, the respective positions of SVBI and SUVBI instruments, as of 15th August 2025, stood at USD4.56 billion and USD460 million. To reinforce monetary policy liquidity expansion, Bank Indonesia has also conducted purchases of government securities (SBN) from the secondary market, reflecting close synergy between monetary policy and the Government's fiscal policy. Throughout 2025 (as of 19 August 2025), Bank Indonesia has purchased a total of IDR 186.06 trillion in SBN, comprising IDR 137.80 trillion from the secondary market and IDR 48.26 trillion from the primary market in the form of Treasury Bills (SPN), including Sharia-based instruments. Moving forward, Bank Indonesia will continue optimising its pro-market monetary operations strategy to increase liquidity and boost the effectiveness of monetary policy transmission to support higher economic growth by achieving the inflation target and maintaining rupiah exchange rate stability.
Bank lending must continue to be enhanced to support economic growth. In July 2025, bank credit grew by 7.03% (yoy), lower than the 7.77% (yoy) growth recorded in June 2025. On the supply side, despite monetary policy rate cuts, liquidity easing, and macroprudential policy incentives introduced by Bank Indonesia, banks remain cautious in extending credit. Banks preferred to place excess liquidity into securities instead of expanding lending. Ample banking liquidity was also supported by deposit growth (DPK), which rose to 7.00% (yoy) in July 2025, in line with the Government's fiscal expansion. On the demand side, credit growth was mainly driven by export-oriented sectors, particularly mining and plantations, as well as transportation, manufacturing, and social services. Overall, moderating credit growth reflects sluggish demand from businesses, which tend to favour internal funds for business expansion. By credit type, growth in consumption loans and working capital loans remained modest at 8.11% (yoy) and 3.08% (yoy), respectively, while investment loans recorded strong growth of 12.42% (yoy), in line with robust investment activity. Meanwhile, sharia financing grew by 8.31% (yoy), whereas lending to Micro, Small, and Medium Enterprises (MSMEs) remained low at 1.82% (yoy).
Bank Indonesia continues to strengthen the implementation of the Macroprudential Liquidity Incentive Policy (KLM) to encourage bank credit/financing growth. As of the first week of August 2025, total KLM incentives reached IDR 384 trillion, distributed to state-owned banks (BUMN) amounting to IDR 171.5 trillion, national private commercial banks (BUSN) IDR 169.2 trillion, regional development banks (BPD) IDR 37.2 trillion, and foreign bank branches (KCBA) IDR 5.7 trillion. By sector, KLM incentives were allocated to priority sectors, namely agriculture, real estate, public housing, construction, trade and manufacturing, transportation, warehousing, tourism and the creative economy, as well as MSMEs, ultra-micro enterprises, and green sectors. Going forward, the KLM policy will continue to be strengthened to stimulate bank credit/financing growth through the optimal allocation of incentives to sectors that significantly contribute to economic growth and job creation, in alignment with the Government's Asta Cita programs.
The banking sector remains resilient and continues to support financial system stability. Bank capital remains high, accompanied by ample liquidity and low credit risk. The Capital Adequacy Ratio (CAR) in June 2025 stood at 25.81%, adequate to absorb risk. Meanwhile, banking liquidity also remained ample, as reflected in the high ratio of Liquid Assets to Third-Party Funds (AL/DPK), which reached 27.08% in July 2025. The banking sector's Non-Performing Loan (NPL) ratio remained low at 2.22% (gross) and 0.84% (net) in June 2025. The latest BI stress tests indicate solid banking industry resilience, supported by maintained corporate repayment capacity and profitability.
The performance of digital economic and financial transactions in July 2025 remained robust, supported by a secure, smooth, and reliable payment system. On the transaction side, digital payments in July 2025 increased across all components, growing by 45.30% (yoy) to reach 4.44 billion transactions. In line with the rising number of users and merchants, transaction volumes through mobile and internet banking applications grew by 26.07% (yoy) and 12.68% (yoy), respectively. Digital payment transactions via QRIS also recorded exceptionally high growth of 162.77% (yoy). From an infrastructure perspective, the volume of retail transactions processed through BI-FAST grew 37.56% (yoy) to reach 414.62 million transactions, with a value of Rp1,016.48 trillion in July 2025. On the wholesale or high-value side, the BI-RTGS system processed 959.32 thousand transactions in July 2025, with a transaction value of Rp19,791.94 trillion. In terms of rupiah currency management, total currency in circulation grew 9.68% (yoy) to Rp1,141.83 trillion in July 2025.
Payment systems operate securely, smoothly, and reliably. Payment system stability remains well-maintained, supported by stable infrastructure and a healthy industry structure. Stable infrastructure was reflected in the smooth and reliable operation of the Bank Indonesia Payment System (SPBI), as well as the adequate supply of currency in both quantity and quality in July 2025. A sound industry structure was demonstrated by the strengthening interconnectivity among payment system participants, accompanied by the expanding Digital Economy and Finance (EKD) ecosystem. Payment transactions utilizing the National Standard for Open API for Payments (SNAP) also increased, in line with the broader level of adoption. Going forward, Bank Indonesia will continue to ensure the availability, reliability, and security of the SPBI infrastructure, both retail and wholesale, as well as the broader payment system infrastructure across the industry. Bank Indonesia will also continue to safeguard the availability of Rupiah currency in sufficient quantity and proper quality for circulation throughout the entire territory of the Republic of Indonesia, including frontier, outermost, and remote (3T) areas.
The global economy, particularly in advanced economies, is projected to weaken further due to the The implementation of reciprocal import tariffs which expanded has the potential to weaken the global economic outlook. In the United States (US), the economic growth outlook is expected to be lower in response to weaker domestic demand. India's economy is also weakening due to the impact of higher tariffs, thereby restraining export performance and the manufacturing sector. Meanwhile, the economies of Europe, Japan and China are expected to improve as a corollary of lower tariff agreements and fiscal support.
From the domestic front, various policy responses need to be continuously strengthened to promote higher economic growth line with the capacity of national economy. Economic growth is forecast to improve in the second semester of 2025, underpinned by positive export performance and increasing domestic demand in line with expansionary fiscal spending. Following the realization in the second-quarter of 2025, economic growth for the entire year of 2025 is projected to be above the midpoint of the 4.6-5.4% range. Policy synergy and coordination between the Government and Bank Indonesia continue to be strengthened to promote higher economic growth in line with the capacity of national economy. In this regard, government spending, including the implementation of priority programs, is expected to provide further support to domestic economic activity. Furthermore, Bank Indonesia will continue optimising its monetary, macroprudential and payment system policy mix to drive economic growth in line with low inflation and maintained rupiah stability.
Indonesia's external economic resilience is expected to remain sound. Bank Indonesia projects sound BOP performance in 2025, supported by a narrow current account deficit in the range of 0.5% to 1.3% of GDP, accompanied by a maintained capital and financial account surplus despite persistently high global uncertainty.
The Rupiah exchange rate is expected to remain stable with an appreciation bias, supported by Bank Indonesia's commitment to maintaining exchange rate stability, attractive yields, low inflation, and improving prospects for Indonesia's economic growth. Bank Indonesia continues to reinforce its stabilisation policy response, including calibrated interventions in the offshore NDF market and the implementation of a triple intervention strategy in the spot market, DNDF, and SBN transactions in the secondary market. Bank Indonesia also continues optimising the full panoply of monetary instruments available, which includes strengthening its pro-market monetary operations strategy through the SRBI, Bank Indonesia Foreign Exchange Securities (SVBI) and Bank Indonesia Foreign Exchange Sukuk (SUVBI) instruments, to boost policy effectiveness in terms of attracting portfolio inflows and supporting rupiah exchange rate stability.
Bank Indonesia is confident that CPI inflation will remain under control and within the 2.5%±1% target corridor in 2025 and 2026. Core inflation is projected to remain low in line with anchored inflation expectations, adequate economic capacity, managed imported inflation, as well as the positive impact of digitalisation. Furthermore, VF inflation is expected to remain under control, supported by continued synergy in inflation control efforts between Bank Indonesia and the central and regional governments.
Bank lending must continue to be enhanced to support economic growth. Bank Indonesia will continue nurturing bank lending, which includes through accommodative macroprudential policies and strengthening coordination with the Financial System Stability Committee (KSSK). Bank Indonesia will continue to strengthen policy synergy with the Financial System Stability Committee (KSSK) to mitigate various global and domestic economic risks that could potentially affect financial system stability. Besides, the KLM policy will continue to be strengthened to stimulate bank credit/financing growth through the optimal allocation of incentives to sectors that significantly contribute to economic growth and job creation, in alignment with the Government's Asta Cita programs. Given the development of credit growth through July 2025 and the policy direction, Bank Indonesia projects that bank lending growth in 2025 will remain within the range of 8–11%.
