Bank Indonesia Chief Reveals Reason for Surprise Interest Rate Hike

Bank Indonesia (BI) Governor Perry Warjiyo has acknowledged that the current depreciation of the rupiah against the US dollar has surpassed the central bank’s earlier projections. He stated that this development led BI to unexpectedly raise its benchmark interest rate, the BI Rate, by 25 basis points to 5.50 percent. Perry explained that the deepening weakening of the rupiah, which exceeded BI’s forecasts, was ultimately responded to by hiking the BI Rate suddenly, outside the mechanism of the monthly Board of Governors’ Meeting. “We saw the rupiah weakening more than we previously projected,” Perry said at the Indonesian Parliament in Senayan, Jakarta, on Tuesday, 9 June 2026. Through this BI Rate increase, Perry hopes the rupiah can strengthen again against the US dollar, whilst also attracting foreign investment into the country. This is intended to offset the large capital outflows that have been occurring recently. “This BI Rate increase is to attract incoming foreign portfolio investment, because since April-May there have been outflows from Government Securities and SRBI,” Perry stated. “Thus, we need to raise the BI Rate so that the rupiah strengthens, stabilises, and inflation next year remains on target,” he added. Bank Indonesia’s Weekly Board of Governors’ Meeting today decided to raise the BI Rate by 25 bps to 5.50 percent, the Deposit Facility rate by 25 bps to 4.50 percent, and the Lending Facility rate by 25 bps to 6.25 percent. Perry explained that this hike is a further step to strengthen exchange rate stabilisation amid high global volatility caused by the war in the Middle East. It also serves as a pre-emptive measure to keep inflation in 2026 and 2027 within the Government’s target range of 2.5±1%.