Predictive Model of the Impact of BI Rate Cuts on LQ45 Stocks in the Indonesia Stock Exchange

Abstract

This study aims to analyze the response of LQ45 stock prices to four announcements of BI Rate cuts made by Bank Indonesia during the period of May to September 2025 and to develop a prediction model for stock price movements following those announcements. The data consist of daily closing prices observed one week before and one week after each announcement, which were then normalized using the Z-score method. Linear regression gradients before and after the announcements were calculated to obtain the delta gradient as an indicator of the impact of interest rate changes. The results show that the May 2025 announcement generated mixed responses, whereas during the July, August, and September announcements, all LQ45 issuers recorded negative delta gradients. The financial sector emerged as the most sensitive to BI Rate changes, leading to the selection of two issuers with the most stable response patterns as the basis for modeling. The model comparison indicates that the exponential model has lower prediction error than the simple linear regression model, making it more representative in describing stock price responses after the announcements. This study highlights the importance of market expectations in interpreting monetary policy and demonstrates the potential of exponential modeling as a short-term predictive tool in the Indonesian capital market.