Economist: BI Rate Hike Aims to Strengthen Rupiah and Curb Imported Inflation
Jakarta (ANTARA) - Economist Hosianna Evalita Situmorang of PT Bank Danamon Indonesia Tbk assessed that Bank Indonesia’s (BI) decision to raise its benchmark interest rate to 5.75 per cent in June 2026 is intended to strengthen the rupiah exchange rate while dampening imported inflation pressures amidst global financial market uncertainty.
“This policy shift reflects BI’s efforts to strengthen the rupiah from its current level of around Rp17,736 per US dollar to curb imported inflation,” Hosianna said when contacted by ANTARA in Jakarta on Thursday.
The 25 basis point BI Rate hike is the third consecutive increase this year and, according to Hosianna, is in line with market expectations.
She noted that BI’s focus on exchange rate stability has become more prominent as external risks increase, including the potential for a US Federal Reserve (The Fed) interest rate hike that could trigger capital outflows from developing countries.
She assessed that rupiah strengthening is crucial given that Indonesia’s inflation in May 2026 rose to 3.08 per cent year-on-year, with core inflation at 2.59 per cent.
“BI reaffirmed its commitment to stabilising inflation expectations and maintaining exchange rate stability through sustained foreign exchange intervention,” she said.
This is evident from the central bank’s move to adjust the threshold for non-core asset foreign exchange purchases to 10,000 US dollars per month and outward foreign exchange transfers to 25,000 US dollars starting 1 July. In addition, transparency of the Prime Lending Rate (SBDK) is also being continuously improved to support lending to priority sectors, accelerate payment system digitalisation, and further deepen financial markets.
“Combined with an expansive fiscal policy, these measures are expected to keep Indonesia’s growth and inflation prospects in 2026 constructive,” she said.
Since May 2026, BI has raised its benchmark rate by a total of 100 basis points. At the Board of Governors Meeting on 19-20 May 2026, the BI Rate was raised by 50 basis points, marking the first adjustment after being held at 4.75 per cent since September 2025.
However, the rupiah exchange rate continued to weaken, touching the Rp18,000 per US dollar level, prompting BI to raise the BI Rate again by 25 bps through a Weekly Board of Governors Meeting on 9 June 2026, outside the regular schedule. Most recently, on Thursday (18/6), through the Monthly Board of Governors Meeting, the central bank decided to raise the BI Rate by another 25 bps.