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Macroeconomic Analysis Series: BI Board of Governors Meeting, October 2025

Author

Listed:
  • Jahen F. Rezki

    (Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI))

  • Teuku Riefky

    (Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI))

  • Faradina Alifia Maizar

    (Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI))

  • Difa Fitriani

  • Mervin Goklas Hamonangan

  • Hardy Salim

  • Alif Ihsan A Fahta

    (Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI))

Abstract

September's headline inflation rose to 2.65% (y.o.y) from 2.31% (y.o.y) in the previous month. The spike was driven mainly by volatile food components following unfavorable weather conditions and pest attacks in key production centers across Sumatra affected supply of red chili and rising production costs of broiler chicken. In addition, increasing gold price also contributed to the overall September’s inflation. On the financial sector side, the ongoing cycle of monetary easing by Bank Indonesia amidst depreciation pressure, the launch of burden sharing program, and drastic cut of 100 bps Bank Indonesia’s deposit facility rate since last July sends a worrying signal of fiscal dominance and erosion of Bank Indonesia's independence to investors. Consequently, Indonesia experienced an enormous capital outflow in the past 30 days and hefty depreciation. Considering these aspects, Bank Indonesia should take a step in manner that serves its purpose of Rupiah stability and hold its policy rate at 4.75% at the October 2025 Board of Governor’s meeting. Keeping its policy rate unchanged, compared to any further rate cut, will not only soften the pressure on Rupiah but also might temper the perception of its independency erosion.

Suggested Citation

  • Jahen F. Rezki & Teuku Riefky & Faradina Alifia Maizar & Difa Fitriani & Mervin Goklas Hamonangan & Hardy Salim & Alif Ihsan A Fahta, 2025. "Macroeconomic Analysis Series: BI Board of Governors Meeting, October 2025," LPEM FEBUI BI Board of Governor Meeting Brief 202510, LPEM, Faculty of Economics and Business, University of Indonesia, revised Oct 2025.
    • Handle: RePEc:lpe:gomeet:202510
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    File URL: https://lpem.org/repec/lpe/queouts/BBG202510.pdf
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