Bank Indonesia Holds Key Interest Rate at 5.75% to Stabilize Rupiah

Bank Indonesia has decided to hold its benchmark BI Rate steady at 5.75 percent, maintaining the deposit facility rate at 4.75 percent and the lending facility rate at 6.50 percent. This decision, announced after the July 21-22, 2026, Board of Governors meeting, aims to safeguard the rupiah's exchange rate stability amidst escalating global uncertainties. Furthermore, the central bank seeks to ensure inflation remains within its target band of 2.5±1 percent.

Governor Perry Warjiyo stated that Bank Indonesia is intensifying its policy mix, including incentive measures, to bolster foreign portfolio investment inflows and enhance rupiah stability. The bank also plans to accelerate the deepening of the Money and Foreign Exchange Market (PUVA) and improve liquidity, addressing segmentation issues within the money and banking sectors. These measures are described as part of an integrated strategy to maintain stability, aligning with a "pro-stability" approach.

In contrast to its previous accommodative stance in 2025, when the BI Rate was cut five times for a total of 125 basis points down to 4.75 percent, BI has adopted a more hawkish approach in 2026. The benchmark rate was held at 4.75 percent through the first four months before being raised by 50 basis points to 5.25 percent in May due to geo-economic and geopolitical shifts. A further surprise increase of 25 basis points to 5.50 percent occurred on June 9, followed by another 25 basis point hike in the June board meeting, reaching the current 5.75 percent. Meanwhile, BI's macroprudential and payment system policies continue to support economic growth, with looser macroprudential policies aimed at stimulating credit to the real sector and maintaining financial system stability.