BI Rate Unlikely to Fall Again, What Are the Causes?
JAKARTA, KOMPAS.com — The room for lowering Bank Indonesia’s benchmark interest rate (BI Rate) is assessed to be increasingly limited amid rising global pressures on domestic economic and financial stability.
On one hand, Bank Indonesia (BI) emphasises that its policy focus is now more directed towards maintaining rupiah exchange rate stability and financial markets.
On the other hand, financial sector authorities assess that the transmission of interest rate cuts to the real sector does not occur instantly, while credit distribution challenges are not solely determined by interest rate levels.
This was evident at the BI Board of Governors’ Meeting in April 2026, where the central bank decided to maintain the BI Rate at 4.75 per cent.
BI Governor Perry Warjiyo stated that opportunities to lower the BI Rate in the future are becoming narrower as global conditions worsen due to geopolitical escalations and financial market uncertainties.
“It appears that in the future, the room for reductions will increasingly close off, and we must respond to this by prioritising stability,” said Perry during a working meeting with Commission XI of the House of Representatives (DPR RI) at the Parliament Building, Jakarta, on Wednesday (8/4/2026).
If previously there was still room for interest rate easing as part of considerations, the central bank now highlights the need to maintain stability amid external shocks.
According to Perry, the pressure on the room for interest rate easing is inseparable from the worsening global landscape since US President Donald Trump announced reciprocal tariff policies to several countries, including Indonesia, on 2 April 2025.
That uncertainty was then exacerbated by the conflict between Iran and Israel, which triggered the closure of the Strait of Hormuz and disrupted international trade distribution.
Global oil prices once reached 122.95 US dollars per barrel. This increase is assessed to potentially pressure domestic fiscal conditions while adding inflation risks.
“It is evident that this will impact Indonesia. Oil prices alone will affect fiscal matters and others. Then, the rise in US government bond prices will impact portfolio inflows and other effects,” explained Perry.
In addition to energy prices, the surge in gold prices is also said to reflect high demand for safe-haven assets amid global turmoil.
According to Perry, the yield increase was triggered by rising US fiscal deficits due to budgets used for war.
Such conditions add further pressure on developing countries, including Indonesia, as they could drive capital outflows and strengthen the US dollar against emerging market currencies.
In that context, the room for interest rate cuts is deemed to be narrowing because monetary easing risks amplifying exchange rate pressures and weakening the attractiveness of domestic assets.