BI Rate Increases to 5.25%, Prepare for Higher Instalments
Bank Indonesia’s (BI) reference rate has been increased by 50 basis points to 5.25 per cent, a move that is set to be felt in households’ loan instalments, particularly floating-rate home loans (KPR).
Executive Director of the Centre for Economic and Law Studies (CELIOS), Bhima Yudhistira, said the sharp rate rise will be promptly reflected by banks in higher lending rates.
“Higher lending costs will press on monthly instalments,” Bhima told Kompas.com on Wednesday, 20 May 2026.
According to him, the transmission of this rate hike will occur more quickly this time than when BI rates fall, which typically required a 3-6 month lag.
“Indeed (the transition will not take 3-6 months). Sticky effect, if rates rise, transmission to bank rates is faster,” he said.
He cautioned the public, particularly those with floating-rate home loans (KPR), to prepare for higher KPR interest.
Beyond that, the increase in lending rates could also impact the business sector. Businesses burdened by higher loan costs are at risk of becoming more efficient, including potential job cuts.
“The most affected are consumer credit, especially motor vehicle loans and floating-rate KPR, followed by working capital loans,” he said.
Similarly, Maybank Indonesia global market economist Myrdal Gunarto said the impact of BI rate hikes on bank lending rates would be felt directly, especially for borrowers with floating-rate debt.
Meanwhile, deposit rates are likely to rise first as depositors demand higher returns from banks.
“Moreover, for existing credit—if there is floating-rate existing credit, when BI Rate rises, its interest also rises,” Myrdal told Kompas.com on Wednesday.
He explained that unlike rate cuts, which typically require a lag of up to six months, rate increases tend to transmit to bank rates more quickly.
“As for rate hikes, it’s already up, because rates such as the Indonesia overnight rate and the SRBI have already risen. So there will be an adjustment now,” he said.