Bank Indonesia (BI) on Thursday raised its benchmark rate by another 25 basis points to 5.75 percent, extending a rapid tightening cycle intended to attract capital inflows and prop up the rupiah.
Coordinating Economy Minister Airlangga Hartarto speaks on July 24, 2025, during a press conference in Jakarta. (Reuters/Ajeng Dinar Ulfiana)
The government has urged state-owned lenders not to rush to raise lending rates following the central bank’s recent interest-rate hike, even as the banks are being called upon to provide affordable loans to small businesses and help finance the administration’s flagship programs.“[President Prabowo Subianto hopes] credit will continue to flow,” Coordinating Economy Minister Airlangga Hartarto told reporters after a meeting between the President and the directors of state-owned banks at the State Palace in Jakarta on Thursday.
While higher policy rates would inevitably translate into higher borrowing costs and put upward pressure on lending rates, Airlangga said the government had urged state-owned lenders to avoid moves that could disrupt the flow of credit to businesses, investment and broader economic activity.
“This is part of the chain reaction stemming from the increase in interest rates. Of course, we hope that state-owned banks will not raise their lending rates too quickly either,” he added.
