BI Rate Could Rise to Maintain Rupiah Value: What Impact Will This Have on Loan Repayments?

Jakarta, Kompas.com - The weakening Rupiah, which has at times reached Rp 17,600 per US dollar, has begun to raise new concerns among the public. Not only could this lead to higher prices for imported goods, but the currency pressure is also thought to impact lending rates and loan repayments. Amid global volatility and a strengthening US dollar, Bank Indonesia (BI) has limited room to lower its benchmark interest rate, the BI Rate. This situation could lead to sustained high lending rates, making it difficult for loan repayments to decrease in the near future. The central bank has maintained its benchmark interest rate, the BI Rate, at 4.75%. This decision was made to maintain Rupiah exchange rate stability amid external pressures. Head of Economics at PT Bank Central Asia Tbk (BBCA), David Sumual, said that BI is currently still likely to maintain its benchmark interest rate. However, monetary policy direction could change if inflationary pressures increase due to rising energy prices. According to David, the size of the interest rate increase will depend on the impact of rising fuel prices on national inflation. “If inflation moves towards the 4% level, BI could potentially raise its benchmark interest rate by around 50 basis points,” he said. Inflationary pressures are thought to have the potential to increase along with the surge in global oil prices due to escalating geopolitical conflicts in the Middle East. For Indonesia, which is still a net importer of oil, the surge in oil prices could put pressure on government finances, increase pressure on the Rupiah, and trigger an increase in domestic energy prices. If BI raises its benchmark interest rate again, the impact could be felt directly on bank lending rates and public loan repayments. Head of Macroeconomics and Market Research at Permata Institute for Economic Research (PIER), Faisal Rachman, said that the possibility of the BI Rate rising to 5% is becoming increasingly likely. PIER estimates that the BI Rate could rise by 25 basis points to 5% in May or June 2026. According to Faisal, there are three main factors that are being considered in determining the direction of BI’s monetary policy. First, domestic inflation, which is currently relatively stable but at risk of increasing due to pressure from the supply and demand sides.