BI Rate Rises, Rupiah Expected to Strengthen from July
Governor of Bank Indonesia (BI) Perry Warjiyo said he is confident that the rupiah will strengthen in July and August, based on the central bank’s decision to raise the benchmark interest rate (BI-Rate) by 50 basis points (bps) and projections of easing domestic foreign exchange demand. In a press conference following the BI Board of Governors Meeting in Jakarta on Wednesday, 20 May 2026, Perry explained that the rate hike is a measured step to uphold external stability amid global economic volatility.
Bank Indonesia decided to raise the BI-Rate by 50 bps from 4.75% to 5.25%. The move was followed by adjustments to other monetary instruments: ‘With the BI-Rate increase and the restructuring of the Rupiah Securities (SRBI) rate structure, we expect foreign inflows to remain large into the domestic market. This will cover the foreign exchange needs in June, which are still high,’ Perry said.
Perry noted that the recent pressures on the rupiah have been driven by a series of global shocks, from international tariff policies, conflicts in the Middle East, rising oil prices, and a stronger US dollar that has prompted capital outflows from emerging markets. Domestically, demand for foreign exchange rose significantly from April to June for Hajj and Umrah pilgrimage expenses, servicing external debt, and distribution of corporate dividends. To anticipate this, BI has intensified intervention through three main channels:
Despite large-scale interventions affecting foreign exchange reserves, BI assures its position remains adequate to maintain external resilience of the national economy.
BI’s monetary policy remains pro-stability, as a pre-emptive step to keep inflation in 2026 and 2027 within the 2.5±1% target.
Macroprudential policy remains pro-growth, with looser macroprudential measures reinforced to encourage credit disbursement to the real sector while maintaining financial-system stability.
The rise was driven mainly by an increase in current accounts of commercial banks at BI, which grew 28.4% year on year.
Perry stated that fundamentally the rupiah should have room to strengthen supported by a low current account deficit.
BI Governor Perry Warjiyo emphasised taking an all-out approach to stabilise the rupiah through interventions in the global forex market and the SRBI instrument.
President Prabowo Subianto has endorsed seven BI strategies to stabilise the rupiah, including restrictions on dollar purchases. BI will lower the monthly limit on dollar purchases without underlying documents to US$25,000 to curb speculation and stabilise the rupiah.
According to Saan, the president’s direct appearance on the plenary podium to read the KEM-PPKF is tangible proof of government seriousness.
Perry said the rupiah should have room to strengthen given a low current account deficit.
BI believes the rupiah will return to stability and potentially strengthen in July–August 2026. It also highlighted issues faced by the public, from rising prices of essential goods to tighter job opportunities and weaker household purchasing power. The market responded positively to the government’s growth target, set quite high for 2027.