BI Rate rises, BI confident 2026 economic growth will remain at 4.9-5.7 per cent

Jakarta — Bank Indonesia (BI) is confident that Indonesia’s economic growth this year remains within the central bank’s forecast, in the range of 4.9-5.7 per cent, even though the policy rate (BI Rate) was decided to rise by 50 basis points in May.

‘In measuring how much the BI Rate should rise, of course we consider growth, how to balance inflation control within target and the impact that certainly would not be too large on economic growth,’ said BI Governor Perry Warjiyo.

In a press conference following BI’s Board of Governors meeting in Jakarta on Wednesday, Perry said monetary authorities also continue close coordination with the government, particularly regarding fiscal policy to maintain stability and spur economic growth.

‘We emphasise that in measuring the BI Rate at 50 bps, we also assess that it is capable of controlling inflation within the target and its impact on economic growth remains within the target range of 4.9 to 5.7 per cent,’ he said.

Rising global commodity prices, he noted, will trigger imported inflation because Indonesia remains dependent on inputs and materials from abroad. He also noted that non-subsidised energy price adjustments also put pressure on inflation.

Therefore, Perry stressed, the BI Rate increase is not only aimed at strengthening stability of the rupiah exchange rate but also to keep inflation in 2026-2027 within the target of 2.5 per cent ± 1 per cent or a range of 1.5-3.5 per cent.

Along with this, he assured that the central bank works closely with the government in inflation control through the Central and Regional Inflation Control Team (TPIP/TPID) to keep volatile food inflation and spillovers from global prices under control.

‘That is why we believe the 50 bps BI Rate increase will keep inflation forecasts for 2026-2027 within the government-set target of 2.5 per cent ± 1 per cent,’ Perry said.