BI Still Has Room to Raise Interest Rates if Rupiah Pressure Continues

Fixed Income Analyst at PT Mirae Asset Sekuritas Indonesia, Jessica Tasijawa, believes there is still room for Bank Indonesia (BI) to raise its benchmark interest rate or BI-Rate if the rupiah remains under pressure. Nevertheless, she assesses that BI’s decision to raise the BI-Rate by 25 basis points (bps) to 5.75 percent reflects the central bank’s strong commitment to maintaining rupiah stability. This increase is the third consecutive hike in the last two months, bringing total monetary tightening to 100 bps since April 2026.

“This interest rate increase is primarily aimed at supporting rupiah appreciation and maintaining external stability. After briefly breaching the psychological level of Rp18,000 per US dollar, the rupiah has begun to show recovery and strengthen to around Rp17,730 per US dollar month-to-date,” Jessica said in Jakarta on Friday (19/6/2026).

Beyond maintaining exchange rate stability, BI is also beginning to monitor potential inflationary pressures. This is evident from the rise in the Wholesale Price Index (WPI) to 5.76 percent year-on-year in May 2026, as well as an increase in core inflation excluding gold components to 1.63 percent from 1.36 percent in April 2026.

According to Mirae Asset, the attractiveness of Indonesian financial assets is also supported by rising yields on Government Securities (SBN) and Bank Indonesia Rupiah Securities (SRBI).