BI Deputy Reveals Reasons Behind 100 Bps Rate Hike in a Month

Deputy Senior Governor of Bank Indonesia (BI) Destry Damayanti has explained the central bank’s rationale for raising interest rates by a total of 100 basis points within a month, bringing the benchmark to 5.75%. BI raised the rate by 50 basis points in May, followed by a 25 basis point increase at a weekly Board of Governors meeting in June, and another 25 basis points at the monthly Board of Governors meeting later that month. Responding to the decision, Destry stated that BI has three mandates under prevailing law. The first is maintaining rupiah exchange rate stability. ‘This relates to the rupiah exchange rate, when we talk about comparisons with external conditions. Domestically, it concerns inflation,’ Destry told CNBC Indonesia at the Economic Update 2026 event, quoted on Wednesday (24/6/2026). The second mandate is maintaining financial system stability, and the third is accelerating the payment system. The rate hikes, she said, were an effort to execute the first mandate, especially given the significant pressures from global economic uncertainty that have spilled over into the domestic economy. ‘Based on the recent conditions, we decided that stability must be our priority. But without forgetting growth,’ she added. Consequently, BI crafted three policies: monetary policy linked to stability, macroprudential policy, and payment system policy. ‘For monetary policy, we ultimately used our BI Rate instrument, where in one month we raised it three times, totalling 100 basis points,’ Destry said. ‘This is to show that for Bank Indonesia, in conditions of very high global uncertainty, we must safeguard stability.’ Meanwhile, to support economic growth, BI is providing incentives to banks that are willing to lend to priority sectors, as well as incentives related to the payment system. Destry added that the rate hikes are also intended to increase the attractiveness of rupiah instruments for offshore investors. ‘Because they see that in this situation, their risk perception and risk premium will increase. Therefore, if they want to invest in a country, they will demand better earnings, better returns. We reflect this in the higher interest rate so that we hope inflows will come in,’ she explained. Destry noted that inflows into government securities (SBN) began to increase in June 2026. Foreign capital also flowed into Bank Indonesia Rupiah Securities (SRBI), with the value reaching between Rp 103 trillion and Rp 105 trillion in June 2026. ‘So at least with these inflows, it will strengthen our external sector resilience because it will bolster our foreign exchange reserves, and we also hope it will increase the supply of foreign currency in our domestic market,’ she said.