Bank Indonesia (BI) unexpectedly maintained its key interest rate at 5.75% for the fourth straight meeting on October 21, defying expectations of a 25 bps hike. BI lowered banks’ reserve requirements (RR) to 7% from 9% for conventional banks and to 5.5% from 7.5% for Islamic banks. However, the central bank remained focused on keeping inflation within its target range while supporting GDP growth. BI raised rates by a total of 100 bps in May and June combined, bringing the policy rate to its highest level since April 2025 to attract foreign inflows and shore up the rupiah. The annual inflation rate accelerated to a three-month high of 3.28% in September, while core inflation eased to 2.84%. BI expects inflation to remain within its 2.
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