Will Bank Indonesia Hike Rate to 6.5% This Year? Expert Weighs In

Bank Indonesia (BI) is expected to implement another interest rate hike this year, potentially reaching 6.5 percent, according to Enrico Tanuwidjaja, ASEAN Economist at United Overseas Bank Limited (UOB). UOB forecasts three 25-basis-point increases, moving the benchmark rate from its current 5.75 percent. Tanuwidjaja anticipates these hikes will occur in July, August, and the fourth quarter of 2026.

Tanuwidjaja views BI's decision to raise the rate to 5.75 percent as appropriate, especially with foreign capital showing renewed interest in the bond market, which saw inflows of US$470 million as of July 8, 2026. However, the stock market continues to experience outflows, totaling US$4.39 billion year-to-date. This projected increase aligns with anticipated hikes by the U.S. Federal Reserve.

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So, UOB's prediction is 3 times a 25 basis point increase to 6.5 percent, now at 5.75 percent.

Despite the tightening monetary policy, Tanuwidjaja believes the rate hikes will not significantly impede economic growth. He points to the current liquidity conditions, with the ratio of Liquid Assets to third-party funds (LA/TPF) remaining around 25 percent, as a buffer. He advises banks to channel funds into sectors with high multiplier effects, such as manufacturing, food and beverage, and accommodation, with a particular emphasis on Micro, Small, and Medium Enterprises (MSMEs).

Bank Indonesia has already raised interest rates three times between May and June 2026, bringing the rate to 5.75 percent. Governor Perry Warjiyo stated these measures are crucial for strengthening the rupiah's exchange rate stability amidst global volatility. The deposit facility rate was raised to 4.75 percent and the lending facility rate to 6.5 percent.

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We actually need a flow of funds in the manufacturing, food and beverage, and accommodation sectors. Especially MSMEs.