BI Monitors Inflation Risks from War and Dry Season
Bank Indonesia’s Deputy Governor Aida S. Budiman stated that the central bank will continue monitoring inflation risks arising from the Iran-Israel conflict. However, she noted that current inflation conditions remain well-controlled.
“We will continue to monitor developments in the Middle East conflict and its escalation, which will certainly have an impact on inflation, particularly through supply chain channels and rising commodity prices,” Aida said at a press conference on Tuesday, 17 March 2026. Domestically, she stated that volatile food prices also require close attention.
Aida explained that the Meteorology, Climatology, and Geophysics Agency (BMKG) has warned of the possibility of a drier dry season arriving earlier than usual. These conditions, according to Aida, could affect horticultural commodity prices such as chilli peppers, maize, and rice.
In February 2026, annual inflation was recorded at 4.76 per cent. Aida attributed the elevated inflation to the 50 per cent electricity tariff discount policy implemented in January and February 2025.
Consequently, according to Aida, inflation levels will remain relatively high through March. “However, overall our inflation projection still falls within the target of 2.5 plus minus 1 per cent,” she said.
Bank Indonesia decided to maintain its benchmark interest rate at 4.75 per cent. The central bank also kept the deposit facility rate at 3.75 per cent and the lending facility rate at 5.50 per cent.
“Considering the assessment of prospects and various global and domestic challenges, particularly the impact of the Middle East conflict, the Bank Indonesia Board of Governors’ meeting on 16-17 March 2026 decided to maintain the BI-Rate at 4.75 per cent,” said BI Governor Perry Warjiyo.
He stated that this decision was made to strengthen the stability of the rupiah’s exchange rate amid the Iran-Israel conflict and to maintain the achievement of the 2026-2027 inflation target within the range of 2.5 plus minus 1 per cent.