MNI Bank Indonesia Preview-Aug 2025: BI Pause, Monitors Events

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EXECUTIVE SUMMARY:

• After Bank Indonesia (BI) has had to intervene to defend the rupiah over the last two weeks due to political unrest and then President Prabowo’s decision to remove respected finance minister Indrawati, rates are likely to be left at 5% on 17 September especially given the central bank’s focus on FX stability. 
• BI has monthly meetings, so it can be cautious to ensure that the rupiah stabilises, that there aren’t significant portfolio outflows and to monitor political and fiscal developments. 
• It expects inflation to stay within its target band this year and next and has eased 125bp so far this cycle and so it can continue to focus on FX stability and be cautious with further rate cuts. We expect it to retain its easing bias.