BI Shifts Focus to Stability, Room for BI-Rate Cut Narrows

Bank Indonesia Governor Perry Warjiyo assesses that the room for lowering the policy interest rate, or BI-Rate, is becoming increasingly limited. This situation is influenced by rising global uncertainties due to conflicts in the Middle East.

“Although we have maintained the BI-Rate at 4.75 percent, it appears that the room for further reductions in the future is likely to close off more and more, and we must also respond to maintain stability,” Perry said during a working meeting with Commission XI in Jakarta on Wednesday.

Bank Indonesia has begun strengthening monetary instruments to safeguard stability. One step taken is through enhancing auctions of Rupiah Bank Indonesia Securities (SRBI) since the beginning of the year.

This measure is aimed at balancing rupiah exchange rate stability, market interventions, and curbing capital outflows.

“SRBI, which we were able to reduce quickly last year, now indeed requires recalibration to attract inflows,” he stated.

Purchases of Government Securities (SBN) in the secondary market are also continuing. To date, year-to-date realisations have reached Rp90.05 trillion.

“These are some recalibrations where monetary policy now places more weight on pro-stability,” Perry said.

Perry explained that global economic prospects are worsening. This condition is triggered by conflicts between the United States and Israel with Iran.

The impacts are spreading to various sectors. Commodity routes are experiencing price increases, particularly in oil. Trade routes are disrupted due to supply chain issues. Financial channels are facing heightened uncertainty.

Global oil prices have surged since February to March and once reached US$122.95 per barrel. Gold prices have also continued to rise throughout 2025 and remain at high levels.

Yields, which previously declined, have now reversed and risen sharply since the conflict intensified. This increase is influenced by the widening US fiscal deficit, including for war financing.

The effects are felt in Indonesia. Pressures emerge from the fiscal side due to rising oil prices as well as from financial markets.

Capital flows to emerging countries are starting to reverse direction. Last year still showed an inflow trend, but since the beginning of the year, there has been a significant outflow in bonds, stocks, and other instruments.