BI Rate Hikes Attract $9 Billion in Foreign Capital: Central Bank Governor

Indonesia's central bank policy of increasing its benchmark interest rate, the BI Rate, during May and June 2026 has successfully attracted foreign capital, according to the interim Governor of Bank Indonesia (BI), Destry Damayanti. The policy resulted in a significant inflow of foreign funds, primarily into government bonds (SBN) and Rupiah Securities (SRBI), amounting to approximately $8.5 to $9 billion in the second quarter of 2026.

“

The first impact, of course, is inflow. Inflow is indeed currently only in SBN and SRBI. In the second quarter of 2026, the increase was quite significant, so the total inflow has been around 8.5 to 9 billion US dollars.

These rate hikes, totaling 100 basis points, were implemented as a strategic response to a confluence of global economic challenges. These included high global volatility, expectations of interest rate increases by the U.S. Federal Reserve, surging global oil prices, and considerable pressure on the Indonesian rupiah's exchange rate. "At that time, the pressure on the rupiah was very high, so since May, our stance on stability has been strengthened, including by raising interest rates by 100 bps," Destry explained during a press conference on financial system stability.

“

At that time, the pressure on the rupiah was very high, so since May, our stance on stability has been strengthened, including by raising interest rates by 100 bps.

The dual objective of the policy was not only to attract foreign investment but also to maintain price stability. Destry highlighted that the rate increases have been effective in managing inflation, with the year-on-year inflation rate in July 2026 recorded at 2.88 percent, well within the target range of 2.5 percent plus or minus 1 percent. Core inflation also remained stable at 2.76 percent, indicating that economic activity had not led to overheating.

“

The hope is, first, there will be a repricing of rupiah assets and also provide a more attractive spread for rupiah-dominated assets.

Furthermore, the rupiah exchange rate showed resilience. As of July 31, 2026, the rupiah stood at Rp 17,994 per U.S. dollar. While it experienced some weakening in mid-July due to renewed Middle East conflict and strengthened expectations of a Fed Funds Rate hike, it remained relatively stable. Indonesia's foreign exchange reserves also remained robust at $145.6 billion by the end of June 2026, sufficient to cover imports and government foreign debt payments, and above international adequacy standards.

“

So, the economic movements that occurred did not drive overheating or drive the overall economy up.