BI Hikes Benchmark Rate as Business Leader Makes Surprising Admission

Bank Indonesia’s decision to raise the benchmark interest rate by 50 basis points to 5.25% is expected to significantly impact businesses. The rate hike is anticipated to prompt commercial banks to adjust their lending rates, ultimately increasing corporate operational costs.

APINDO’s Public Policy Head, Sutrisno Iwantono, said the move was unavoidable given pressure on the rupiah’s exchange rate. However, businesses face severe challenges as financing costs rise amid weak consumer purchasing power.

‘Bank Indonesia has raised the benchmark rate to 5.25%, a 50 basis point increase. This is an uncomfortable situation with difficult choices. The rate hike will inevitably lead to higher lending rates at commercial banks, significantly affecting businesses,’ Sutrisno told CNBC Indonesia on Sunday (31 May 2026).

He added that companies with bank loan obligations will face additional cash flow pressures, potentially forcing them to adjust business strategies, including operational efficiencies and delayed expansion plans.

‘If the interest rate isn’t adjusted, it would also have significant economic impacts as an uncontrolled rupiah would harm the economy. Inflation would rise, imported goods would become more expensive, and many manufacturers rely on imported raw materials,’ he stated.

Sutrisno noted that sectors most vulnerable to the rate hike are those heavily dependent on bank financing, such as property, automotive, construction, and labour-intensive industries, which are expected to face the greatest pressure.

On the other hand, industries using imported raw materials may benefit from monetary policy stabilising the rupiah, as exchange rate stability is crucial for production continuity.

‘Sectorally, those most affected are businesses reliant on bank financing like property, automotive, construction, labour-intensive industries, and retail SMEs. However, manufacturers using imported materials will see some advantages,’ he explained.

Prolonged high interest rates would intensify pressure. In the short term, companies might survive through efficiency and cash flow management, but if sustained beyond three quarters, businesses are likely to slow down and enter a ‘wait-and-see’ phase, delaying new expansions and impacting economic growth, Sutrisno said.

‘Should the high rates persist beyond three quarters, companies will likely slow down and enter a wait-and-see phase, postponing new expansions, which would inevitably affect our economic growth,’ he added.