BI Expected to Hold BI-Rate at 5.75%, Here Are the Economists' Considerations
A number of economists assess that the BI-Rate needs to be maintained at 5.75% during the Bank Indonesia (BI) Board of Governors Meeting (RDG) in July 2026. This follows a period of monetary tightening with a cumulative increase of 100 basis points (bps) since May 2026.
“Given that global investors have returned to our stock market and government bond market, so that the rupiah exchange rate against the US dollar is below Rp17,899 per US dollar, we estimate the BI-Rate still needs to remain at 5.75%,” said Bank Tabungan Negara (BTN) Macro Economist Myrdal Gunarto in a written statement in Jakarta on Wednesday (22/7/2026).
He noted that Indonesia’s foreign exchange reserves actually increased last month compared to May 2026. This signals that the peak period of domestic foreign currency demand has passed. According to him, the pressure that is starting to increase currently comes from the value of oil imports as oil prices have surged again. Nevertheless, consumer inflation is projected to remain below 3.5% in July 2026.
“Our economy currently needs an interest rate climate that can drive more aggressive economic growth. This is so that our economic growth can accelerate again from the aspects of consumption, investment, and export financing,” said Myrdal.
Separately, PermataBank Chief Economist Josua Pardede stated that the main reason for holding the interest rate is that inflation has indeed risen, but has not yet exceeded the target. Inflation in June 2026 rose to 3.34% year-on-year from 3.08% in May 2026, mainly due to cost pressures from the weakening rupiah, transportation, and imported goods prices.
The increase in inflation needs to be watched, but it is not yet considered strong enough to push for further interest rate hikes as long as the rupiah and inflation expectations do not deteriorate. However, Josua did not deny that the risk of a hike remains open if the rupiah exchange rate moves uncontrollably, capital outflows increase, or the market again doubts the central bank’s ability to maintain stability.
He reminded that external pressures remain significant because the US dollar is still relatively strong, the direction of US interest rates remains tight, oil prices are still sensitive to geopolitical conditions, and Indonesia’s trade balance is beginning to show signs of weakening. In May 2026, Indonesia even recorded a trade deficit of 1.16 billion US dollars, the first deficit in more than six years, as imports grew stronger than exports.
If BI raises interest rates again, according to Josua, the aim would be more to ease pressure on the rupiah and maintain capital flows rather than to control inflation. This is because current inflation is driven more by cost and supply factors, so an interest rate hike would only have an indirect impact through rupiah stabilisation.
On the other hand, portfolio flows show that support for the rupiah remains fragile. Net inflows were recorded at 5.65 billion US dollars in January-July 2026, but were largely supported by SRBI and bonds, while stocks still saw outflows and the rupiah remained weak at around Rp17,895 at the close of trading on Friday (17/7/2026).
“This shows a pattern of fund flows that are sensitive to yields and easily reversed,” said Josua. If BI holds the interest rate, Josua assesses this move is not a sign that the central bank is losing policy space, but rather a form of prudence.