BI raises the benchmark rate to 5.25%

Bank Indonesia (BI) has decided to raise the benchmark rate, or BI Rate, by 50 basis points to 5.25 percent. The decision was made at the May 2026 Board of Governors Meeting (Rapat Dewan Gubernur, RDG) held on Tuesday, 19 May 2026, and reiterated on Wednesday this week. The deposit facility rate has been raised by 50 basis points to 4.25 percent, and the lending facility rate has likewise risen by 50 basis points to 6 percent.

Gubernur BI Perry Warjiyo described the rate hike as a continuation of measures to strengthen the stability of the rupiah against the backdrop of heightened global volatility due to the Middle East conflict. “And as a pre-emptive step to keep inflation in 2026 and 2027 within the government’s target of 2.5 percent plus or minus 1 percent,” Perry said in an online press conference following the RDG in Jakarta on Wednesday, 20 May 2026, quoted by Antara.

Perry explained that the decision aligns with the 2026 monetary policy focus on stability (pro-stability) to bolster Indonesia’s external resilience to global shocks. The macroprudential policy and payment system measures, meanwhile, remain oriented to support growth (pro-growth).

Moreover, Perry reinforced that the looser macroprudential stance will be maintained to promote growth by increasing credit to the real sector, while preserving financial stability.

President Prabowo Subianto has previously targeted the rupiah against the US dollar in a range of Rp 16,800–17,500 for the 2027 fiscal year. “Our fiscal and monetary strategies must be able to keep our exchange rate stable,” Prabowo said at the 19th plenary meeting of the House of Representatives on Wednesday, 20 May 2026.

Compared with the 2026 Budget (APBN 2026), the target is higher than the previously set Rp 16,500 per US dollar. He outlined this during his briefing on the macroeconomic framework and main fiscal policy (KEM-PPKF) at the DPR plenary.

In addition to the exchange rate, the President announced a number of macroeconomic assumptions for the 2027 APBN. For economic growth, he targeted 5.8–6.5 percent. For inflation, 1.5–3.5 percent. For the 10-year Government Securities yield, 6.5–7.3 percent.

Oil price targets for Indonesia are US$70–95 per barrel. Oil production is expected to reach 602–615 thousand barrels per day. Gas lifting targets are 934–977 thousand barrels per day.

Alfitria Nefi contributed to the writing of this article.

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