Jakarta, CNBC Indonesia - Bank Indonesia (BI) is expected to raise\nits benchmark interest rate again during the Board of Governors Meeting\n(RDG) on 21-22 July 2026. Pressure on the rupiah and the risk of rising\ninflation are the main considerations.<\/p>\n
A CNBC Indonesia poll of 14 institutions and agencies shows the\nmajority of respondents expect BI to raise its benchmark rate. Eight\nrespondents project a 25 basis point (bps) increase in the BI Rate, from\n5.75% to 6.00%. Meanwhile, six others expect the interest rate to be\nheld.<\/p>\n
If the majority projection materialises, this month\u2019s increase would\nbe BI\u2019s fourth tightening of 2026. BI has previously raised interest\nrates cumulatively by 100 bps since May, reaching 5.75% in June.<\/p>\n
Pressure on the rupiah is one of the main reasons the majority of\neconomists forecast a rate hike. According to Refinitiv, the Garuda\ncurrency remains under pressure, closing 0.25% weaker at Rp17,930 per US\ndollar in trading on Monday (20\/7\/2026), or a 7.53% depreciation\nyear-to-date (ytd). This position means the rupiah is still struggling\nto move away from the psychological level of Rp18,000 per US dollar.<\/p>\n
The depreciation occurred as the US dollar remained quite strong in\nglobal markets amid renewed geopolitical tensions in the Middle East.\nThe conflict has also driven up oil prices, adding to inflation risks\nand foreign exchange requirements. Under these conditions, a rate hike\ncan be used to maintain the attractiveness of domestic financial assets.\nA competitive yield differential is expected to help stem foreign\ncapital outflows and ease pressure on the rupiah.<\/p>\n
\u201cThe BI Rate is expected to rise by 25 bps to 6.00% to ensure rupiah\nexchange rate stability amid reheating geopolitical risks in the Middle\nEast,\u201d CIMB Niaga Economist Mika Martumpal told CNBC Indonesia. In line\nwith this, Valbury Asia Futures Chief Economist Fikri C. Permana also\nsees the need for further rate hikes. Besides rupiah volatility, BI\nneeds to anticipate the possibility of further global monetary policy\ntightening. \u201cThe factors are the still considerable rupiah volatility,\nthe growing expectation of a Fed rate hike this year, and the drive to\nincrease the attractiveness of domestic portfolio assets,\u201d Fikri\nsaid.<\/p>\n
Beyond the rupiah, inflation developments reinforce the forecast for\na rate hike. Indonesia\u2019s inflation in June 2026 was recorded at 3.34%\nyear-on-year (yoy), up from 3.08% in May. Inflation remains within BI\u2019s\ntarget range of 2.5% plus-minus 1%, but its position is now approaching\nthe upper limit of 3.5%. The weakening rupiah and rising global energy\nprices risk adding price pressure through imported goods, raw materials,\ntransport, and production costs. A rate hike can help contain this\npressure by stabilising the exchange rate and managing inflation\nexpectations.<\/p>\n
Bank Danamon Chief Economist Hosianna Evalita Situmorang shared a\nsimilar projection, expecting BI to raise rates by 25 bps again to keep\ninflation within the target while curbing further rupiah depreciation.\nHowever, some assess that BI needs to allow time for the cumulative 100\nbps rate hikes since May to work through the financial markets and the\neconomy.<\/p>\n
Bank Maybank Indonesia Economist Juniman believes BI remains focused\non safeguarding the rupiah and financial stability amid geopolitical\ntensions and global monetary tightening. Yet, he argues this pressure\ndoes not necessarily have to be met with a rate hike in July, especially\nas lending rates have begun to rise and manufacturing activity has\nweakened. Bank Permata Chief Economist Josua Pardede considers the BI\nRate level of 5.75% to be sufficiently tight. Therefore, a decision to\nhold rates with firm communication is deemed more appropriate as long as\nrupiah movements can still be managed. \u201cThe baseline scenario for the\nJuly RDG is that BI holds the BI Rate at 5.75% with a vigilant policy\nmessage. An additional hike is only necessary if rupiah pressure and\ncapital flows worsen materially,\u201d Josua said. Rising inflation has also\nnot yet breached BI\u2019s target, giving the central bank room to wait and\nobserve developments in the rupiah, capital flows, and energy prices\nbefore raising rates again.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/indonesia-divided-should-bi-rate-rise-again-or-is-it-time-to-pause-1784627581", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }