Indonesia's central bank cuts key rate to 5.5% to boost economy

Bank Indonesia (BI) announced a 25 basis point cut to its benchmark interest rate, bringing it down to 5.5%. The decision, revealed on Wednesday, May 21, 2025, also saw the deposit facility rate lowered to 4.75% and the lending facility rate to 6.25%. The move aims to stimulate economic growth amid controlled inflation and a stable rupiah. According to Governor Perry Warjiyo, the decision aligns with expectations of low and controlled inflation for 2025 and 2026, projected at 2.5% plus or minus 1%. The rate cut is expected to invigorate financial markets as lower rates can increase liquidity. This may encourage market participants to invest in riskier assets like stocks. Experts believe BI has further room to ease monetary policy, supported by a strengthening rupiah and minimal inflation pressure.