BANK INDONESIA MAINTAINS POLICY RATE AT 4.75 PCT, SIGNALS ROOM FOR FUTURE CUTS

JAKARTA, Feb 19 (Bernama) -- Bank Indonesia (BI) has maintained its benchmark policy rate at 4.75 per cent, citing heightened global uncertainty while keeping the door open for potential easing.

BI governor Perry Warjiyo said the decision reflects the need to preserve financial stability amid persistent external risks, even as inflation remains low and economic growth requires continued support.

“After two days of discussion, we have decided to keep the policy rate unchanged at 4.75 per cent,” he said during an online press conference which was broadcast live on BI’s YouTube account on Thursday.

Despite the decision to hold rates, Perry stressed that the central bank still sees room for further rate cuts, subject to incoming data and global developments.

“We remain consistent as we still see room to lower interest rates, given low inflation and the need to continue stimulating economic growth,” he said.

However, the central bank governor cautioned that policy direction would remain data-dependent given elevated uncertainty in global markets.

On growth prospects, Perry said Indonesia’s economic expansion in the first quarter of 2026 is projected to remain strong, supported by seasonal consumption and coordinated policy stimulus.

He noted that high population mobility during the first quarter, coinciding with Chinese New Year, Aidilfitri and Wesak celebrations, would boost household spending.

Perry added that monetary stimulus through interest rates and liquidity expansion, alongside government fiscal stimulus, would further underpin growth momentum.

He also noted that the transmission of earlier monetary easing has begun to lower bank lending rates, with new rates declining by 40 basis points from 9.20 per cent at the beginning of 2025 to 8.80 per cent in January of this year.

“Going forward, efforts to reduce deposit and lending rates must be intensified to encourage higher credit growth that supports sustainable economic expansion,” he said, adding that the cumulative 125 bps reduction in BI's rate in 2025 and liquidity expansion had contributed to lower market rates.

On the rupiah, Perry said exchange rate movements were influenced by both fundamental and technical factors, noting that domestic indicators such as inflation, growth and yields suggest the currency should be more stable and trend stronger.

However, global risk premiums have generated short-term pressure, prompting the central bank to step up market intervention.

“We are increasing the intensity of interventions to stabilise the exchange rate in both the offshore NDF (Non-Deliverable Forward) market and the domestic market,” he said.

Perry expressed confidence that the rupiah would eventually move in line with its fundamentals, adding that foreign portfolio flows have remained positive over the past two months, supporting exchange rate stability while domestic liquidity remains ample.

-- BERNAMA