Research

A Deflationary Pulse, Bank Indonesia to Cut Interest Rate?

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Algo Research Team

Economics | Mar 12, 2025 | Views: 661

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Key Summary:

  • The first deflation reading since 2000 due to weak demand
  • BI should cut interest rate as prices are much lower than target
  • Global macroeconomic headwind should improve to support IDR

Indonesia experienced a deflationary pulse as consumer prices unexpectedly fell by -0.1% YoY in February 2025, marking the first deflation since March 2000, as a result of soft economic activity.


February (and January) headline figures were significantly lower than Bank Indonesia’s (BI) target range of 1.5% to 3.5%, prompting the need for stimulus, in our view.

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