BI Interest Rate Rises, Indef Economist Signals Pro-Stability Path

Bank Indonesia raised its policy rate by 50 basis points to 5.25 per cent, indicating a pro-stability policy direction, including to curb foreign capital outflows. ‘Stability is the basis for growth,’ said Eko Listiyanto of the Institute for Development of Economics and Finance (Indef) in Jakarta, on Friday, 22 May 2026. He noted that the rate increase reflects a central bank stance that prioritises stability amid global geopolitical pressures that have weighed on the rupiah in recent times.

‘Bank Indonesia is currently prioritising stability over economic growth. This step is important to maintain exchange-rate stability in the rupiah amidst global geopolitical pressures and potential capital outflows,’ he said.

In the May 2026 Board of Governors Meeting (RDG), BI raised the policy rate by 50 basis points from 4.75 per cent to 5.25 per cent. This BI-Rate increase marks the first adjustment since the policy rate was kept at 4.75 per cent since September 2025. Throughout 2025, BI indeed cut the policy rate five times for a total reduction of 125 basis points.

According to Eko, in remarks accompanying his discussion on the What’s on Economy podcast, Indonesia’s challenges are varied, including maintaining consistency of state spending to support growth and restore market confidence.

Separately, he said the direct delivery of the Macro Economic Framework (KEM)-PPKF and the 2027 RAPBN by President Prabowo Subianto on Wednesday (20 May 2026) demonstrates the government’s effort to build optimism for a national economic rebound amid global and domestic challenges.

Nevertheless, Eko noted that the growth assumption of 5.8 to 6.5 per cent remains optimistic given current conditions.

However, he welcomed the rise in government revenue through April 2026, particularly from tax receipts such as PPh 21, PPN, and PPnBM. He said the rise is also influenced by the seasonal pattern of tax revenue which tends to rise in April.

Eko reminded that the government’s main challenge going forward is to maintain consistency in public expenditure to continue supporting growth. He cautioned that if government spending moderates again in the following semester, economic growth momentum could slow.

He also warned that the effectiveness and quality of programme implementation matter far more than merely expanding the number of beneficiaries.

‘Looking ahead, the focus should be on ensuring government programmes are optimal, not just expanding beneficiaries, but the quality of programmes and their governance,’ he said.