Bank Indonesia Announces Surprise Rate Hike for June 2026
The Bank Indonesia Board of Governors’ Weekly Meeting on Tuesday, 9 June 2026, decided to raise the BI-Rate by 25 basis points to 5.50%, the Deposit Facility rate by 25 basis points to 4.50%, and the Lending Facility rate by 25 basis points to 6.25%. Governor Perry Warjiyo stated in a press release that the increase is a follow-up measure to strengthen rupiah exchange rate stabilisation from the impact of high global volatility due to the Middle East conflict, as well as a pre-emptive step to ensure inflation in 2026 and 2027 remains within the government’s target range of 2.5% plus or minus 1%.
In addition to the BI-Rate hike to 5.50%, Bank Indonesia is taking steps to strengthen rupiah exchange rate stabilisation by increasing yields and providing several incentives in monetary operations to attract foreign investment flows. The measures include a rise in the interest rate structure for Bank Indonesia Rupiah Securities across all tenors of 6, 9, and 12 months to boost returns for foreign portfolio investment. This adjustment follows market mechanisms and is intended to keep portfolio investment in Indonesia competitive with other countries.
The central bank is also offering an incentive in the form of a 10% reduction in hedging swap rates for foreign investors to further enhance attractiveness and compensate for their existing obligations. Bank Indonesia noted that it has been providing swap hedging facilities for foreign investment inflows through Indonesian banks, which then pass them on to the central bank, while regular swap rate determination continues according to prevailing market mechanisms.
Furthermore, Bank Indonesia announced the reopening of repurchase agreement (repo) instrument auction windows for 3, 6, 9, and 12-month tenors for banks to ensure sufficient liquidity in the money market and banking sector, with the aim of keeping primary money growth in double digits above 10%. The expansion of repo facilities will become the main instrument for monetary liquidity management compared to other mechanisms, including the purchase of government bonds from the secondary market. The bank will also increase the intensity of monetary operations in both rupiah and foreign exchange to strengthen rupiah stabilisation. Rupiah monetary operations will be enhanced by opening SRBI auctions twice a week, while foreign exchange operations will continue with increased intervention intensity through spot and domestic non-deliverable forward transactions as well as non-deliverable forward transactions in overseas markets.
Bank Indonesia emphasised it will continue to strengthen monetary policy coordination with the government’s fiscal policy to support rupiah stabilisation. In its evaluation since the monthly Board of Governors Meeting on 19-20 May 2026, the rupiah exchange rate showed weaker development than expected, driven not only by ongoing global volatility and high domestic foreign exchange demand but also by foreign portfolio investment outflows from Indonesia. In response, Bank Indonesia deemed it necessary to take further steps to strengthen rupiah stabilisation by again increasing yields and offering other incentives to encourage foreign investment inflows, aiming to preserve Indonesia’s external economic resilience and achieve the 2026 and 2027 inflation targets.