Economist: Bank Indonesia Should Raise Its Benchmark Interest Rate
Indonesian Institute for Economic and Community Studies (LPEM) of the Faculty of Economics and Business, University of Indonesia (UI), says Bank Indonesia (BI) should raise its benchmark interest rate. LPEM notes that the rupiah is currently at its weakest level in history, around IDR 17,600 per US dollar as of 13 May 2026.
LPEM records that BI has used more than US$10 billion of foreign exchange reserves in the last four months in an effort to stabilise the rupiah. “To broaden rupiah stabilisation efforts, Bank Indonesia should raise the policy rate by 25 basis points to 5.00 percent at the upcoming Board of Governors meeting,” wrote Jahen F. Rezki, a researcher at LPEM UI, in the Macro Economic Analysis Series on Monday, 18 May 2026.
A similar view was voiced by Fakhrul Fulvian, Chief Economist at Trimegah Sekuritas Indonesia. He argues that BI needs to take more aggressive and anticipatory policy steps amid ongoing pressure on the rupiah.
Fakhrul contends that the current conditions are no longer just a matter of oil prices or the direction of the Fed’s rate, but touch on a more fundamental issue: the credibility of Indonesia’s macroeconomic policy anchor. He believes BI should raise the policy rate by 50 basis points.
This rate increase, Fakhrul says, is not because the economy is collapsing or inflation is high. “Rather, it is necessary so that we do not pay a higher price later as a result of losing the anchor of expectations,” he said in a written statement on Monday, 18 May 2026.
The BI Board of Governors meeting is scheduled to take place on 19–20 May 2026. Earlier, BI Governor Perry Warjiyo had suggested that room to cut rates was becoming increasingly limited. The reason is that BI would focus on stabilising the rupiah amid the strengthening US dollar index due to the Middle East conflict.
Perry said BI needs to recalibrate a range of policies to respond to capital outflows from domestic financial markets. “First, on interest rates, although we keep the BI Rate at 4.75, moving forward the room for cuts seems to be increasingly closed and we must then address it to use it for stability,” Perry told a meeting with Commission XI of the DPR at the DPR building, Jakarta, Wednesday, 8 April 2026.