Bank Indonesia Suddenly Raises Benchmark Interest Rate to 5.50 Per Cent
The Bank Indonesia Board of Governors Meeting has decided to further increase the BI-Rate by 25 basis points (bps) to 5.50%, the deposit facility rate by 25 bps to 4.50%, and the lending facility rate by 25 bps to 6.25%. This decision was taken as a follow-up measure to strengthen the stabilisation of the Rupiah exchange rate, which has continued to weaken recently.
“This is also a pre-emptive step to ensure that inflation for 2026 and 2027 remains within the government’s target range of 2.5% ± 1%,” stated Bank Indonesia Governor Perry Warjiyo in an official statement on Tuesday. He added that the policy is also aimed at increasing yields to enhance the attractiveness of foreign portfolio investment inflows into Indonesia.
In an evaluation since the meeting on 18-19 May 2026, the Rupiah exchange rate showed weaker development than expected. Aside from ongoing global volatility and high domestic demand for foreign exchange, the weakness was driven by outflows of foreign portfolio investment from Indonesia. Consequently, Bank Indonesia deems it necessary to take further steps to strengthen Rupiah stabilisation by increasing yields and providing other monetary incentives to encourage foreign investment inflows.
In addition to the BI-Rate increase to 5.50%, Bank Indonesia is implementing several measures to strengthen Rupiah stability, including: increasing the interest rate structure of Bank Indonesia Rupiah Securities (SRBI) for all 6, 9, and 12-month tenors; providing incentives through a reduction in hedging swap rates for foreign investors; reopening the repurchase agreement (repo) auction window for 3, 6, 9, and 12-month tenors for banks; and increasing the intensity of both Rupiah and foreign exchange monetary operations.
Bank Indonesia continues to strengthen monetary policy in coordination with the Government’s fiscal policy. As stated in the joint explanation by the Minister of Finance and the Governor of Bank Indonesia on 6 June 2026, this fiscal and monetary coordination is intended to be synchronised and mutually reinforcing to stabilise the Rupiah exchange rate. Governor Perry Warjiyo has also called on banks to increase efficiency so that credit interest rates remain manageable despite the BI-Rate rising to the 5.50% level.