External resilience remains strong amid global uncertainty. Bank Indonesia's reserve position at the end of December 2025 increased to 156.5 billion US dollars, equivalent to 6.3 months of imports and government foreign debt payments, and above the international adequacy level of around 3 months of imports. The rupiah exchange rate on 31 December 2025 was recorded at Rp16,675 per US dollar, depreciating 3.48 points compared to the end of 2024. Furthermore, as of 23 January 2026, the rupiah exchange rate was recorded at Rp16,815 per US dollar, or experiencing a depreciation of 0.83% compared to the level at the end of December 2025.
The gradual depreciation of the exchange rate was influenced by foreign capital outflows due to increased uncertainty in global financial markets. In addition, the increase in foreign exchange demand by banks and domestic corporations, in line with economic activity, also affected the rupiah. Going forward, Bank Indonesia is committed to maintaining rupiah exchange rate stability, including through measured intervention in non-delivery forward transactions in overseas and domestic markets, non-delivery forward and spot markets domestically, and strengthening pro-market monetary operations strategy. Going forward, the exchange rate is expected to remain stable with a tendency to appreciate, supported by attractive yields, low inflation, and continued positive prospects for Indonesia's economic growth.
Inflation in 2025 remained within the target range of 2.5% plus or minus 1%, with the consumer price index inflation in December 2025 at 2.92% year on year. Core inflation remained low at 2.38%, in line with economic growth still below capacity and supported by the consistency of monetary policy interest rates in anchoring inflation expectations in line with the target, and imported inflation that remained controlled. Administered price group inflation was kept low at 1.93%. Meanwhile, volatile food group inflation was still relatively high at 6.21%, contributed primarily by shallots due to limited supply caused by weather disruptions and rising seed prices. Going forward, inflation in 2026 and 2027 is expected to remain low within the target of 2.5% plus or minus 1%. Core inflation is also expected to remain low as expectations remain anchored within the target, economic capacity is still ample, imported inflation is controlled, and the positive impact of digitalization.
Meanwhile, volatile food inflation is expected to remain controlled, supported by the synergy of inflation control by the central and regional inflation control teams, TPIP and TPID, as well as the strengthening of the implementation of the national food resilience program. Bank Indonesia continues to strengthen the policy mix to maintain macroeconomic and financial system stability and drive sustainable economic growth amid rising global uncertainty, in close synergy with the Financial System Stability Committee, KSSK, and the government's Astacita program. Monetary policy in the fourth quarter of 2025 was pursued by maintaining the BI Rate, strengthening rupiah exchange rate stabilization, and enhancing the pro-market monetary operations strategy to support rupiah exchange rate stabilization, interest rate reduction, and monetary liquidity expansion in maintaining stability and driving economic growth.
Bank Indonesia also continues to strengthen the implementation of macro-prudential liquidity incentive policies, KLM, to drive banking credit and financing growth. The development of digital payment systems continues to be accelerated to drive the national digital economy and finance and government electronic finance. Consistent with this policy mix, in the monetary domain, Bank Indonesia has undertaken the following policy steps. First, Bank Indonesia maintained the policy interest rate in October, November, and December 2025 as well as January 2026 at the level of 4.75%, in line with efforts to maintain rupiah exchange rate stability from the impact of rising global uncertainty, strengthen the effectiveness of monetary policy loosening transmission, and macro-prudential policies to support the achievement of the inflation target and drive economic growth.
Going forward, Bank Indonesia will continue to assess the room for further BI Rate reduction, with the 2026-2027 inflation forecast controlled within the target of 2.5% plus or minus 1%, and the need to also drive higher economic growth. Second, Bank Indonesia has intensified steps to stabilize the rupiah exchange rate through non-delivery forward intervention in overseas markets and intervention in domestic markets through spot and non-delivery forward transactions as well as secondary market SPN purchases. Bank Indonesia continues to strengthen rupiah exchange rate stabilization through managing the structure of monetary instrument interest rates and swap facilities to maintain the attractiveness of foreign portfolio inflows into domestic financial assets.
In addition, Bank Indonesia has also expanded foreign exchange monetary operations instruments with spot and swap instruments in Chinese yuan and Japanese yen against the rupiah, integrated with money market and foreign exchange market development to support the strengthening of local currency transactions. On 26 January 2026, the rupiah closed stronger at Rp16,770 per US dollar. As mentioned earlier, going forward we project the rupiah will tend to appreciate in line with Bank Indonesia's exchange rate stabilization policy and Indonesia's stronger economic fundamentals.
Third, Bank Indonesia continues to strengthen the pro-market monetary operations strategy to drive interest rate reduction and liquidity expansion through the optimization of SRBI issuance and SBN purchases in the secondary market. Liquidity expansion was pursued by Bank Indonesia through a reduction in SRBI from Rp916.97 trillion at the beginning of 2025 to Rp730 trillion at the end of 2025, and remained at a relatively similar level until 23 January 2026. Bank Indonesia has also purchased SBN from the secondary market in line with the expansionary monetary policy. Bank Indonesia purchased SBN totaling Rp332.1 trillion during 2025, including secondary market purchases and a de-switching program with the government totaling Rp246.6 trillion, as well as Rp23.7 trillion through 23 January 2026.
The SBN purchases were carried out in accordance with market mechanisms and consistent with the monetary policy pursued by Bank Indonesia. Furthermore, the SBN purchases represent a form of close synergy between Bank Indonesia's monetary policy and the government's fiscal policy. In this regard, part of the SBN was used by the government to finance economic programs for the people under the Astacita program, such as housing and the Villages Red and White Cooperative, KDMP. In addition, Bank Indonesia provides remuneration on banks' excess liquidity placements at 25 basis points below the deposit facility rate, namely at 3.5%, to increase banking flexibility in utilizing excess liquidity for credit and financing distribution to the real sector.
Fourth, Bank Indonesia also continues to accelerate money market and foreign exchange market deepening to strengthen the effectiveness of monetary policy transmission in driving interest rate reduction and liquidity expansion, including through strengthening the effectiveness of Bank Indonesia Floating Rate Note issuance and the development of overnight index swap, OIS, tenors above overnight to form an efficient interest rate structure in the money market. Also through strengthening the role of primary dealers to increase SRBI transactions in the secondary market and repurchase agreement, repo, transactions through central counterparty, CCP. In the macro-prudential policy domain, Bank Indonesia continues to drive interest rate reduction, liquidity increases, and credit growth acceleration to achieve higher economic growth.
This loose macro-prudential policy is pursued through, first, strengthening performance-based and forward-oriented macro-prudential liquidity incentive policies, KLM, to accelerate the reduction of banking credit and financing interest rates in order to optimize intermediation while maintaining prudential principles. Since 16 December 2025, the macro-prudential liquidity incentive has been adjusted to 4.5% of third-party funds for incentives for credit and financing distribution to certain sectors designated by Bank Indonesia as lending channels, and 1% of third-party funds for incentives for banks that reduce credit interest rates in line with the direction of the BI Rate policy channel. As of the first week of January 2026, total KLM incentives reached Rp397.9 trillion, distributed to state-owned bank groups at Rp182.9 trillion, BUSN at Rp174.7 trillion, BPD at Rp33.1 trillion, and foreign bank branches at Rp1.2 trillion.
Sectorally, KLM incentives were distributed to the government's priority sectors, including agriculture, industry and downstreaming, services including the creative economy, construction, real estate, and housing including public housing, as well as MSMEs, cooperatives, and inclusive and sustainable finance. Second, efforts to drive banking interest rates have also been strengthened through the publication of the Basic Credit Interest Rate Transparency Assessment, SBDK, with deeper analysis on credit interest rates by priority sectors covered by KLM, including the response of SBDK changes to changes in Bank Indonesia's policy interest rate. Third, maintaining loose macro-prudential policies to drive credit and financing to the real sector, including maintaining the countercyclical capital buffer ratio, loan-to-value ratio, macro-prudential intermediation ratio, motor vehicle credit down payment ratio, as well as the foreign funding ratio and macro-prudential liquidity buffer ratio.
Fourth, macro-prudential policy is also directed to support MSMEs through macro-prudential liquidity incentives for MSMEs, cooperatives, and inclusive and sustainable finance of up to 1.5% of third-party funds, the implementation of the inclusive financing ratio requiring banks' minimum inclusive credit allocation of 30% of total credit, and the development of MSME business models in regions, particularly in the food agriculture and export commodity sectors.
Payment system policy continues to be directed to contribute to driving economic growth through strengthening the payment system industry structure and expanding digital payment acceptance. First, Bank Indonesia issued Bank Indonesia Regulation Number 10 of 2025 concerning payment system industry regulation and Board of Governors Regulation Number 32 of 2025 concerning payment system industry regulation on 24 December 2025, as a comprehensive regulatory framework to realize a consolidated and resilient national payment system industry. These regulations, which will take effect on 31 March 2026, represent Bank Indonesia's commitment to maintaining payment system stability in accordance with the mandate of Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector, the P2SK Law.
Second, for expanding digital payment acceptance, Bank Indonesia continues to strengthen and expand the implementation of QRIS both domestically and internationally. The strategy for strengthening domestic digital payment acceptance is enhanced through the QRIS Jelajah Kuliner Indonesia 2026 campaign and tourist travel packs at various tourist destinations. The expansion of QRIS implementation without switching, QRIS TAP, in the transportation and retail sectors continues, and cross-border QRIS cooperation continues to be expanded through preparation of implementation with China and South Korea in the second half of 2026. Furthermore, in order to accelerate local government digitalization, the implementation of the capacity and literacy program for synergy in accelerating and expanding regional digitalization, or P2DD catalyst, is being carried out.
Third, as part of efforts to maintain public purchasing power and transaction efficiency, Bank Indonesia has also extended the easing policies related to credit cards and the national clearing system tariff, SKNBI, until 30 June 2026. The policy extension includes, first, the minimum credit card payment policy remains at 5% of the total bill, and the late payment penalty policy at a maximum of 1% of the total bill. Second, the SKNBI tariff remains at Rp1 from Bank Indonesia to banks, and the SKNBI tariff to customers at a maximum of Rp2,900.
Fourth, Bank Indonesia also consistently maintains the availability of rupiah currency in sufficient quantities and fit-for-circulation quality throughout the territory of the Republic of Indonesia, including the outermost, frontier, and remote regions, the 3T, to meet the needs of the public and the smooth running of economic activities across the country. Bank Indonesia will continue to strengthen policy synergy with the Financial System Stability Committee to maintain financial system stability and with the government to maintain stability and drive economic growth in line with the government's priority programs.
Furthermore, Bank Indonesia continues to strengthen and expand international cooperation in central banking, including payment system connectivity and local currency transactions, as well as facilitating the organization of investment and trade promotion in priority sectors in cooperation with relevant ministries and agencies. That concludes the report from us. Thank you very much. Wassalamualaikum warahmatullahi wabarakatuh.
