JAKARTA - Bank Indonesia kept its benchmark interest rate at 4.75 percent on Wednesday, December 17, ending a year of rate cuts as officials prioritize defending the rupiah over stimulating growth.

The decision matched expectations from most economists. According to Bank Indonesia's official statement, the central bank had already cut rates five times this year totaling 125 basis points before pausing in December. Governor Perry Warjiyo said the hold reflects efforts to maintain rupiah stability amid high global uncertainty.

The rupiah has been under pressure throughout 2025. Perry Warjiyo said during the press conference that the rupiah depreciated 0.3 percent through mid-December and about 3.6 percent for the full year 2025, according to the central bank statement.

Foreign capital outflows have been a major driver. According to Bank Indonesia data released December 12, nonresidents sold net 25.95 trillion rupiah in stocks, 3.49 trillion rupiah in government bonds, and 116.34 trillion rupiah in SRBI (Bank Indonesia securities) throughout 2025.

A weaker rupiah and continued foreign outflows can slow hiring at home, while Indonesians working overseas earn less once their wages are converted back into rupiah.

The hold comes despite the US Federal Reserve cutting rates by 25 basis points to 3.5-3.75 percent on December 10. Normally central banks in emerging markets follow Fed moves, but Indonesia's rupiah concerns overrode that logic.

The bigger problem for Indonesia is that rate cuts haven't translated to cheaper loans. Bank lending rates remain sticky despite the central bank's aggressive easing, according to Bank Indonesia, meaning businesses and consumers haven't felt much benefit from easier monetary policy.