Amidst War and Rupiah Collapse, Investors Await Bank Indonesia's Move

Jakarta – Ahead of Bank Indonesia’s Monetary Policy Meeting (RDG BI) scheduled for 16-17 March 2026, market participants anticipate that Bank Indonesia will maintain its benchmark interest rate at the upcoming decision, with the announcement expected on 17 March 2026.

Market consensus compiled from 13 institutions shows a unified view. All respondents project that BI will maintain the BI Rate at 4.75% at this meeting.

At the previous RDG held on 18-19 February 2026, BI decided to maintain the BI Rate at 4.75%, with the Deposit Facility rate at 3.75% and Lending Facility rate at 5.50%.

This decision marks BI’s fifth consecutive rate hold through February 2026. Should the rate be maintained again in March, it will represent the sixth consecutive hold.

In its official statement last February, BI affirmed that the decision aligns with its policy focus on strengthening rupiah stability amidst elevated global financial market uncertainty, whilst supporting the achievement of inflation targets for 2026-2027 and economic growth.

At the upcoming RDG, BI is expected to maintain interest rates to preserve rupiah stability and manage inflation.

The rupiah remains under pressure against the US dollar. As of Monday, 16 March 2026 at 09:37 WIB, month-to-date performance shows the rupiah has weakened 1.26% to Rp16,972 per US dollar, approaching its psychological level of Rp17,000 per US dollar.

This pressure stems largely from global factors, particularly the strength of the US dollar index, which reflects the greenback’s performance against six major world currencies.

Amidst escalating conflict in the Middle East, investors are again seeking safe-haven assets, including US dollars. This environment constrains the movement of other currencies, including the rupiah, which faces continued pressure.

This aligns with the view of Juniman, Chief Economist at Maybank Indonesia, who believes BI will maintain interest rates in March 2026 given ongoing rupiah weakness.

“We project that Bank Indonesia will maintain the BI Rate at 4.75% in March 2026. This is due to continuing pressure on the rupiah resulting from global financial market uncertainty and the impact of rising geopolitical tensions, namely the Iran-Israel-US conflict,” Juniman stated.

Juniman also highlighted rising inflation pressure in February 2026. Statistics Indonesia (BPS) reported annual inflation in February 2026 reached 4.76%, above BI’s target, whilst core inflation stood at 2.63% year-on-year.

According to him, this condition also factors into BI’s decision to maintain its interest rate policy direction. Nevertheless, Juniman believes room for rate cuts remains available going forward, given that domestic core inflation pressure remains relatively low.

“However, BI still has space to cut its benchmark rate in the future, given that domestic core inflation pressure remains low. Core inflation in February 2026 was recorded at 2.63% year-on-year,” Juniman said.

He added that rate easing at the right time could still support domestic economic growth.

Thus, BI’s primary focus at the March RDG is expected to remain on maintaining rupiah stability amidst global turbulence. Meanwhile, prospects for rate cuts are not entirely closed off, but such cuts are likely to become more feasible once external pressures ease and financial market conditions stabilise.