BI-Rate Hike Projected to Increase Credit Costs

Josua Pardede, Chief Economist at Bank Permata, said a 50 basis point increase in the benchmark interest rate (BI-Rate) would make loan repayments more expensive. He noted that after the BI-Rate rose to 5.25%, the trend of declining credit interest rates is likely to be halted.

Deposit rates are expected to rise more quickly as banks work to retain customer funds from shifting to government securities (SBN) or Bank Indonesia Securities (SRBI). Josua highlighted that consumption loans, non-subsidised home mortgages (KPR), vehicle loans, multi-purpose loans, SMEs, trade, construction, property, and long-term investments are the most vulnerable segments.

“Rising interest rates increase loan repayments, prompting households to delay purchases of homes, vehicles, and durable goods,” Josua told Tempo, quoted on Thursday, 28 May 2026. He added that the rate hike would exacerbate already weak segments, particularly the middle class and first-time buyers.

Josua explained that the BI-Rate hike presents a dilemma: while necessary to stabilise the rupiah, it could suppress credit-based consumption and make consumers more cautious with spending.

Josua stated that Bank Indonesia must stabilise the rupiah through measured interventions and effective instruments, while the government should support via fiscal discipline, export strengthening, accelerated productive spending, and protection of vulnerable groups’ purchasing power. “With this approach, the rate hike is not merely an emergency brake but part of a strategy to maintain stability without excessively sacrificing growth,” he said.

Senior Deputy Governor of Bank Indonesia (BI) Destry Damayanti said the decision to raise the benchmark rate to 5.25% aims to make rupiah-denominated instruments attractive again for investors, thereby encouraging capital inflows into domestic financial markets.

“We had to raise the BI Rate because the global environment has shifted to higher rates for longer,” Destry said at the National Conference on Regional Economic Development at Balai Kartini, Jakarta, on Monday, 25 May 2026.

She added that US government bond yields are rising, with US inflation increasing and the US dollar strengthening.