Five BI Rate Cuts in 2025: Here's What Actually Happened to Your Portfolio
5 min read
Loading...
5 min read
Bank Indonesia delivered five separate BI rate cuts in 2025. Every headline said the same thing: lower rates, higher stocks. So did your portfolio jump 10%, 20%? Almost certainly not. On the days those cuts actually landed, the IHSG moved by about one percent, and often less.
That gap between the headline and the actual number is the whole story. Here is what happened each time BI moved, in both directions, with the real figures.
A BI rate cut lowers the cost of borrowing across the economy. In theory it works through two channels at once: cheaper loans should help company earnings, and lower deposit and bond yields should push some savers to accept more risk for a better return, which includes buying stocks. Put together, the textbook says a rate cut should be good news for the IHSG, the Jakarta Composite Index that tracks the Indonesia Stock Exchange as a whole.
The theory is directionally right. The size of the reaction is where it falls apart.
Bank Indonesia lowered its benchmark rate five times through 2025, taking it from 6.00% down to 4.75%, a cumulative 125 basis points cut that year alone (a basis point is one hundredth of a percent). Here is the IHSG's same-day reaction to each decision, based on Indonesia Stock Exchange closing data reported at the time:
| Decision date | Rate move | New BI rate | IHSG close | Same-day move |
|---|---|---|---|---|
| 15 Jan 2025 | −25 bps | 5.75% | 7,079.56 | +1.77% |
| 21 May 2025 | −25 bps | 5.50% | 7,142.46 | +0.68% |
| 16 Jul 2025 | −25 bps | 5.25% | 7,192.02 | +0.72% |
| 20 Aug 2025 | −25 bps | 5.00% | 7,943.82 | +1.03% |
| Sep 2025 | −25 bps | 4.75% | (index kept climbing through Q4) | n/a |
Source: Bank Indonesia policy announcements and Indonesia Stock Exchange closing data as reported by Databoks and IDN Financials at the time of each decision, retrieved 3 August 2026.
Notice something else in the table: BI Rate cuts almost never surprise the market by the time they land. Every one of the five was flagged in advance by economists surveyed ahead of the meeting. A well-signalled cut is mostly priced in before the announcement, which is a large part of why the actual decision day barely moves the index.
Here is the part that actually tests whether "rate direction predicts stock direction" holds up. BI held its rate at 4.75% through the rest of 2025. Then, in 2026, it did the opposite of the 2025 story: it raised rates by a cumulative 100 basis points, in an off-cycle emergency hike on 9 June and a scheduled hike on 18 June, taking the rate to 5.75%.
By the textbook logic above, a rate hike should hurt stocks. It makes borrowing more expensive and pulls money toward deposits instead. And in the months before that hike, the IHSG had indeed fallen hard: a roughly 35% decline over six months, bottoming at 5,317 on 8 June 2026, the same day the rupiah fell past Rp 18,100 per US dollar, its weakest level on record.
But the hike itself is where the simple story breaks. Over the two trading days right after BI's 9 June emergency hike, the IHSG surged 7.57% and then a further 2.71%, clawing back to 5,902 as the rupiah stabilised. A rate increase produced one of the index's best two-day stretches of the year.
By 22 July 2026, BI held rates steady at 5.75%, defying market expectations of a further hike, with the rupiah at Rp 17,917 per US dollar and inflation still projected within BI's 2.5% target band (give or take one percentage point) for 2026 and 2027.
Source: Bank Indonesia policy statements, Focus Economics, TradingEconomics and Databoks market reporting on the June and July 2026 decisions, retrieved 3 August 2026.
Put the two years side by side and the pattern is not "cuts are good, hikes are bad." It is that the rate decision is a symptom, not the driver. In 2025, BI was cutting because inflation was under control and the currency was stable, so the cuts happened in a calm environment and the index drifted up gently around them. In 2026, BI was hiking because the currency was in crisis, so the hikes happened in a chaotic environment and the index swung far harder, in both directions, than any 2025 cut ever managed.
If you are holding IDX stocks, the useful question on a rate-decision day is not "did BI cut or hike," it is "why." A cut into a stable currency and contained inflation is a different signal than a hike used to defend a currency that has already lost 35% of its value against the dollar in six months.
Rather than trading off a single BI announcement, look at the indicators together. NetWort's Macro Context page tracks the BI rate, the rupiah exchange rate, and inflation side by side, along with a scorecard of what regime those signals currently point to, so you can see whether a rate move is happening in a calm environment or a stressed one before deciding what it means for your own holdings.