Rupiah Strengthens to Rp 18,058 per US Dollar After BI Rate Hike

Bank Indonesia's surprise decision to increase the BI Rate by 25 basis points to 5.5% has bolstered the Indonesian rupiah, pushing it to Rp 18,058 against the US dollar. This move aims to stabilize the currency amidst global turmoil, particularly the conflict in the Middle East, and to preemptively control inflation for 2026 and 2027.

The central bank has signaled a need for further measures to stabilize the rupiah, including enhancing returns and incentives to attract foreign investment. This comes as Indonesia's foreign exchange reserves saw a decline in May 2026, reaching $144.9 billion, down from $146.2 billion the previous month. The decrease is attributed to government foreign debt payments, global bond issuances, and tax transactions.

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BI raised the benchmark interest rate, BI Rate, by 25 bps to 5.5 percent today. This increase is a follow-up step to strengthen the stabilization of the rupiah exchange rate from the impact of high global volatility due to the war in the Middle East and as a pre-emptive step to keep inflation in 2026 and 2027 within the target range of 2.5±1 percent set by the government.

In response to economic pressures, the government is reportedly preparing a new economic stimulus package. The initiative seeks to protect public purchasing power, which is vulnerable to currency fluctuations and broader economic instability. Discussions are also underway regarding the Indonesia Financial Center project, viewed as a potential instrument for strengthening the national financial sector. This coordinated effort between Bank Indonesia and the Ministry of Finance underscores a commitment to maintaining the national economy on its projected course.

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The government is currently strengthening policy synergy, both monetary and fiscal. Coordination between BI and the Ministry of Finance is part of the effort to keep the national economy on track.