Economist: 50 basis-point BI Rate rise timely, anchors rupiah stability
In times like these, Bank Indonesia must not be late. If late, stabilisation costs will be much higher.
Jakarta — Chief Economist Fakhrul Fulvian of Trimegah Sekuritas Indonesia regards the 50 basis-point BI Rate hike decided by Bank Indonesia as the right move to re-anchor rupiah stability amid mounting global pressures. ‘The BI decision is correct. It’s not just a rate hike; it is a statement that Indonesia’s policy anchor is still safeguarded. In such a situation, Bank Indonesia cannot be late. If late, stabilization costs will be much higher,’ Fakhrul said in a statement in Jakarta on Wednesday.
According to him, the decision chosen by BI proves that the pressures Indonesia is facing are not just ordinary volatility, but a phase that requires a pre-emptive monetary response.
Fakhrul assessed that the 50 bps BI Rate increase will be a turning point for the rupiah. He projects the rupiah to appreciate gradually, with the first important level around Rp17,300 per USD, before moving toward a new equilibrium around Rp16,800 per USD.
‘The rupiah has finished its overshooting phase. With a firm BI response, the market now has a new anchor. Rp17,300 becomes the first stopping point, and if policy coordination goes well, the rupiah could move toward Rp16,800,’ he explained.
He also noted that market participants no longer need to be excessively defensive against the USD. In his view, a combination of BI Rate hikes, FX intervention, strengthening of DNDF/NDF, and expansion of CNH-Rupiah and local currency transactions (LCT) will strengthen confidence that rupiah pressures are starting to be contained.
However, Fakhrul cautioned that the work is not finished. After the rate hike, the next step is to repair the structure of the domestic money and bond markets.
In his view, the Rupiah Securities Rate (SRBI) should commence a gradual decline to avoid continuously siphoning liquidity from government bonds and long-dated assets.
‘After the BI Rate rises, SRBI should not remain the main liquidity magnet for too long. If SRBI is too attractive, funds will keep concentrating in short-term instruments. This could disrupt the SBN market, depress the yield curve, and cause unhealthy policy transmission,’ Fakhrul said.
He considered a normalisation of the yield curve essential for the market to function properly again. A healthier yield curve would help investors return to long-term bonds, support financing for development, and improve expectations for the rupiah.
Fakhrul also emphasised the importance of consensus between BI and the Ministry of Finance. In this context, the rate hike must be followed by clear fiscal communication, especially regarding energy subsidies, debt issuance strategy, and government financing direction.
‘BI and the Ministry of Finance must be united. BI protects the stability anchor, the Ministry of Finance protects fiscal credibility. If both move in concert, the rupiah can strengthen, yields can be healthier, and the market will again trust Indonesia’s broader narrative,’ Fakhrul said.
In the May 2026 Board of Governors Meeting, the BI Rate was decided to rise by 50 bps from 4.75% to 5.25%. The deposit facility rate rose by 50 bps to 4.25%, and the lending facility rate rose by 50 bps to 6%.
As a note, the BI Rate increase marks the first adjustment after the policy rate had been kept at 4.75% since September 2025. Throughout 2025, BI had previously cut the policy rate five times, totaling 125 bps.
The rupiah closing rate today, Wednesday (20 May), strengthened by 52 paise or 0.29% to Rp17,654 per USD from Rp17,706. The Jakarta Interbank Spot Dollar Rate (JISDOR) also firmed to Rp17,685 per USD from Rp17,719.