Bank Indonesia Holds Benchmark Rate at 5.75% to Ensure Stability

Bank Indonesia has held its benchmark interest rate steady at 5.75 percent, signaling a commitment to economic stability amidst global uncertainties. The decision, announced following the Bank Indonesia Board of Governors' Monthly Meeting on August 18-19, 2026, also saw the deposit facility interest rate remain at 4.75 percent and the lending facility interest rate at 6.5 percent.

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We have decided to maintain the BI Rate at 5.75 percent

This policy stance is a continuation of Bank Indonesia's strategy to bolster the rupiah's stability against a backdrop of high global volatility, particularly concerning events in the Middle East. Concurrently, the central bank aims to keep inflation anchored close to its target of 2.5 percent for both 2026 and 2027. This approach seeks to manage inflationary pressures while providing a stable environment for economic activity.

The decision aligns with predictions from economic observers. The Institute for Economic and Social Research at the University of Indonesia's Faculty of Economics and Business (LPEM UI) had anticipated the hold, suggesting it preserves room for future policy adjustments. LPEM UI noted that while July 2026 inflation slowed to 2.88 percent, potential upward pressures exist from the El Niño phenomenon and the peak dry season in August and September.

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Bank Indonesia is expected to maintain the BI Rate

External factors, including the U.S. Federal Reserve's decision to maintain its target rate, also play a role. However, internal market dynamics, such as the recent resignation of Bank Indonesia Governor Perry Warjiyo, initially caused brief turmoil. Despite this, the market appears to have stabilized, supporting the central bank's decision to maintain the current interest rate.

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However, inflationary pressures are expected to increase in the coming months as the El Niño phenomenon and the dry season peak in August and September 2026