BI no longer signals possibility of BI-Rate cut, prioritises stability
Bank Indonesia (BI) has ceased signalling the possibility of reducing its benchmark interest rate (BI-Rate) in the announcement of the results of the Central Board of Governors Meeting (RDG) on Tuesday, as global risks escalate and pressure mounts on the rupiah’s value.
“(Due to) the impact of the Middle East war, which is why we no longer mention the possibility of reducing interest rates in this statement. We have removed this from the statement because we will indeed maintain the BI-Rate at its current level,” said BI Governor Perry Warjiyo during an online press conference on the RDG results in Jakarta on Tuesday.
Perry stated that the decision to maintain the BI-Rate was made to strengthen rupiah stabilisation through intervention and adequate foreign exchange reserves.
Additionally, optimisation of interest rates, intervention, and adequacy of foreign exchange reserves will continue to be monitored going forward in line with evolving dynamics.
Perry outlined additional measures to safeguard rupiah exchange rate stability through strengthened monetary operations utilising various available instruments, aimed at attracting back or at least stemming the outflow of foreign portfolio capital.
These steps include strengthening foreign exchange traffic policy through foreign exchange traffic reporting (LLD) provisions, set to take effect from April 2026.
In the March 2026 RDG, BI maintained the BI-Rate at 4.75 per cent. Similarly, the deposit facility and lending facility rates remained at 3.75 per cent and 5.50 per cent respectively.
BI announced this decision to strengthen rupiah exchange rate stability against the deteriorating global conditions resulting from the Middle East war, whilst maintaining the 2026-2027 inflation target of 2.5 per cent plus or minus 1 per cent.
This decision marks the continuation of the BI-Rate hold since October 2025, following a cumulative reduction of 150 basis points since September 2024, or 125 basis points throughout 2025.
Prior to the escalation of Middle East tensions marked by US and Israeli strikes on Iran on 28 February 2026, BI had consistently signalled the possibility of reducing the BI-Rate this year whilst remaining data dependent.
The rupiah exchange rate on 16 March 2026 stood at Rp16,985 per US dollar, weakening by 1.29 per cent (point-to-point) compared with the end-February 2026 level in line with weakening of non-US dollar currencies.
BI noted that in March 2026, portfolio investment experienced net outflows of 1.1 billion US dollars driven by heightened uncertainty in global financial markets due to the Middle East war.
Indonesia’s foreign exchange reserves position at the end of February 2026 stood at 151.9 billion US dollars. This figure is equivalent to financing 6.1 months of imports or 5.9 months of imports and government foreign debt repayment, and remains above the international adequacy standard of approximately 3 months of imports.