Bank Indonesia raises benchmark rate to 5.25% and signals gradual loan‑rate pass‑through

Bank Indonesia (BI) lifted its benchmark BI‑Rate by 50 basis points to 5.25% to curb rupiah weakness amid external pressures and to keep domestic financial assets attractive. Deputy Governor Destry Damayanti said the hike aims to protect the currency while the economy’s fundamentals remain solid.

Economists note that the transmission of the rate increase to bank lending rates will be gradual, typically taking three to six months. Maybank Indonesia’s Global Markets Economist Myrdal Gunarto explained that banks usually pass only 25‑35 basis points of the rate change to loan rates over the longer term, preferring to avoid payment shocks to borrowers. Deposit rates tend to adjust faster, and larger banks with cheap funding may hold credit rates steady to protect market share. Credit growth continued in April, driven by investment and working‑capital loans, despite the higher policy rate.