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Investing.com - Bank of Indonesia (BI) is expected to cut its benchmark interest rate by an additional 75 basis points by the first quarter of 2026, according to a new forecast from Bank of America (NYSE:BAC).
BofA analysts predict BI will implement a 50 basis point reduction in the fourth quarter of 2025, followed by a 25 basis point cut in the first quarter of 2026. These cuts would bring Indonesia’s "terminal" rate to 4%, which falls below the pre-pandemic low of 4.25%.
The forecast comes as BI demonstrates a commitment toward supporting economic growth amid what BofA describes as "seemingly favorable" current conditions. The bank’s strategy note indicates that this "all-out easing" approach will particularly benefit front-end bonds.
BofA analysts suggest that a combination of flush liquidity and asymmetric rate corridor would make the lower bound the effective policy rate for transmission, consistent with BI’s previous statements that Indonesia may continue to trade closer to the bottom of the corridor.
The research note also points out that while the broader direction of fiscal and monetary policies remains "marginally negative" for the Indonesian rupiah (IDR), BofA expects U.S. dollar weakness to cushion the impact and maintain stability in the USD/IDR exchange rate.
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