CORE: BI Prioritises Rupiah Stabilisation Through Interest Rate Hike
Jakarta (ANTARA) - Executive Director of the Center of Reform on Economics (CORE) Indonesia, Mohammad Faisal, assesses that Bank Indonesia is prioritising stabilisation of the rupiah exchange rate by raising the benchmark interest rate or BI-Rate by 25 basis points (bps) to 5.75 percent.
“Stabilisation must indeed be prioritised first,” Faisal said when met at the CORE Indonesia office in Jakarta on Thursday.
Faisal highlighted that Bank Indonesia has raised the interest rate three times in a short period, to 5.25 percent on 20 May, then to 5.50 percent on 9 June, and subsequently to 5.75 percent on 18 June.
According to him, this move demonstrates Bank Indonesia’s seriousness in stabilising the rupiah exchange rate, which is currently at around Rp17,800 per US dollar.
“BI has raised rates several times in a short period. I think the policy direction is now more serious about stabilisation than economic growth,” Faisal said.
When asked about the possibility of BI raising interest rates further to strengthen the rupiah exchange rate, Faisal explained that the spread between the BI Rate and the Fed’s interest rate is currently around 200 basis points (bps).
According to Faisal, that figure is already sufficient to attract business players and US dollar holders to exchange their dollars for rupiah.
“It should be enough with 200 bps, in my opinion. If the rate is raised again, the cost to economic growth would be too great,” Faisal said.
Furthermore, Faisal conveyed that it is time for the public to accept the reality that the new equilibrium point for the rupiah exchange rate against the US dollar is at around Rp17,000.
“It means we must accept the new reality that the new equilibrium is at Rp17,000. If we keep trying to push it to Rp16,000, the cost to the real sector will be the problem,” Faisal said.
Bank Indonesia (BI) decided to raise the benchmark interest rate or BI-Rate by 25 basis points (bps) to 5.75 percent during the June 2026 Board of Governors Meeting (RDG).
The Deposit Facility rate also increased by 25 bps to 4.75 percent, and the Lending Facility rate rose by 25 bps to 6.50 percent.
“This increase is a further step to strengthen rupiah exchange rate stabilisation amidst persistently high global uncertainty, as well as a pre-emptive measure to keep inflation in 2026 and 2027 within the target range of 2.5±1 percent set by the Government,” said BI Governor Perry Warjiyo at a press conference on the results of the RDG in Jakarta on Thursday.
Perry explained that the decision is aligned with macroprudential and payment system policies that remain directed to support pro-growth economic expansion.