Bank Indonesia Hikes Rates to Stabilize Rupiah
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Bank Indonesia Hikes Rates to Stabilize Rupiah
- Indonesia's central bank, Bank Indonesia (BI), unexpectedly raised its benchmark interest rate by 25 basis points to 5.50% on June 9, 2026, in an effort to stabilize the rupiah.
- This off-cycle decision by Governor Perry Warjiyo and the Board of Governors aimed to address the rupiah's significant depreciation, which had seen it hit a record low of Rp 18,184 against the US dollar on June 8, 2026.
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Bank Indonesia (BI) implemented a surprise 25-basis-point interest rate hike on June 9, 2026, increasing its benchmark BI-Rate to 5.50%. This unscheduled move was a direct response to the Indonesian rupiah’s persistent weakening, which had reached a record low of Rp 18,184 against the US dollar on June 8, 2026. The central bank also adjusted its Deposit Facility rate to 4.50% and Lending Facility rate to 6.25%.
The depreciation of the rupiah was attributed to several factors, including heightened global market volatility stemming from conflicts in the Middle East, strong domestic demand for foreign currencies, and ongoing outflows of foreign portfolio investment from Indonesia. Governor Perry Warjiyo stated that the rate increase was crucial for maintaining economic stability and enhancing Indonesia’s appeal as an investment destination. The policy also sought to boost returns and attract foreign portfolio investment inflows.
Furthermore, the rate hike was described as a preemptive measure to keep inflation within the government’s target range of 2.5% ±1% for 2026 and 2027. Bank Indonesia noted that the rupiah’s performance since its monthly meeting in May 2026 had been weaker than anticipated. This off-cycle adjustment marked one of several rate increases by BI in recent months, following a 50-basis-point hike in May 2026. The central bank continued to monitor global and domestic financial market developments, utilizing various policy instruments to ensure market stability and sufficient foreign exchange liquidity.