Trade War Heats Up, BI Holds Reference Interest Rate at 5.75%

Bank Indonesia (BI) maintained its benchmark interest rate, the BI 7-Day Reverse Repo Rate (BI7DRR), at 5.75% following its Board of Governors meeting on April 22-23, 2025.

The deposit facility interest rate was set at 5%, and the lending facility interest rate at 6.5%.

BI Governor Perry Warjiyo stated that this decision was made to keep inflation within the target range of 2.5% plus or minus 1% in 2025 and 2026, and to maintain rupiah exchange rate stability amid global uncertainty.

(Read also: BI Maintains 5.75% Interest Rate in March 2025 to Stabilize Rupiah)

**BI Still Needs to Hold Interest Rates**

According to Katadata, several economists believed that BI should still hold its interest rates this month. Teuku Riefky, a researcher in macroeconomics and financial markets at the Institute for Economic and Community Research, Faculty of Economics and Business, University of Indonesia (LPEM FEB UI), said that BI is currently facing significant pressure on the exchange rate.

"Although recent inflation is still below BI's target range, the current deflationary pressure is temporary, following the end of the electricity discount subsidy program in February," said Riefky.

Riefky assessed that pressure on the rupiah is likely to continue in the coming months due to increasing global uncertainty.

Meanwhile, Yusuf Rendy Manilet, an economist at the Center of Reform on Economics (CORE) Indonesia, said that BI needs to hold its interest rates amid increasing global uncertainty, particularly due to the tariff war between major countries such as the United States and China.

"The decision to hold interest rates is a prudent step," said Yusuf.

Yusuf stated that this potentially ongoing tariff war is not only suppressing global trade but also triggering uncertainty in investment flows and financial market stability, including in developing countries like Indonesia.

(Read Katadata: BI Holds Interest Rate at 5.75% Amidst US-China Tariff War Volatility)