BI Raises Benchmark Interest Rate to 5.25 Percent to Stabilise Rupiah

Jakarta — Bank Indonesia has officially raised its benchmark interest rate, the BI Rate, by 50 basis points to 5.25 per cent. The decision was taken amid global pressures from the war in the Middle East, which has triggered a depreciation of the rupiah and capital outflows from developing economies.

BI Governor Perry Warjiyo said the decision was adopted at the BI Board of Governors Meeting held on 19-20 May 2026. In addition to the BI Rate, the deposit facility rate rose to 4.25 per cent and the lending facility to 6 per cent.

‘This increase is a move to stabilise the rupiah from the impact of high global volatility stemming from the Middle East war, and to keep inflation in check in 2026 and 2027,’ Perry said in a remote media briefing on Wednesday, 20 May 2026.

BI noted that the war in the Middle East worsens the global economic conditions. The closure of the Strait of Hormuz triggered a rise in oil prices and heightened global inflation pressures. The situation also led global investors to move funds into safe assets such as United States Treasuries.

As a result, the rupiah came under pressure. The exchange rate on 19 May 2026 stood at around Rp17,700 per US dollar, down 2.2 per cent from the end of April 2026.

BI also expects the US Federal Funds Rate to remain unchanged until the end of 2026. There is even a possibility of a further rise in 2027 due to persistent US inflation.