Bank Mandiri Predicts Stable Interest Rates in December 2025 Amid Currency Pressure

Economic Rationale Behind BI's Decision

Bank Mandiri's economic research team forecasts that Bank Indonesia will maintain the current BI Rate of 4.75% during their December 2025 meeting. This prediction is primarily driven by the ongoing pressure on the Indonesian Rupiah against the US Dollar. The economic team, led by Dian Ayu Yustina, Head of Macroeconomic Research Department, emphasizes that the central bank's current focus is balanced between supporting economic growth and maintaining currency stability.

Global Factors Influencing BI's Monetary Policy

The analysis highlights that despite a 90% probability of Fed Funds Rate cuts, the impact on the Rupiah remains uncertain. Dian Ayu noted that high volatility in the foreign exchange market is likely to prompt the central bank to adopt a conservative stance for the remainder of 2025. Consequently, any potential interest rate cuts are now expected to materialize in 2026 rather than in the current year.

Future Monetary Policy Outlook for 2026

Bank Mandiri projects that two potential rate cuts may occur in 2026 as external pressures are expected to ease and domestic stability is maintained. This forecast is supported by BI Governor Perry Warjiyo's recent statement that while there is room for monetary easing, the timing and magnitude will depend on both global and domestic economic developments. Warjiyo emphasized that BI will continue to adopt a data-driven approach to their monetary policy decisions.

Challenges in Monetary Transmission Effectiveness

The BI Governor also highlighted that despite 125 basis points of policy rate cuts in 2025, banking sector interest rates have not decreased as rapidly as desired. This has led to a renewed focus on enhancing the effectiveness of monetary policy transmission alongside maintaining currency stability in the short term. The central bank is navigating these challenges while keeping a close watch on both domestic and international economic indicators.