Economist: BI-Rate Hike an Anticipatory Step to Mitigate External Risks
Chief Economist of BTN, Myrdal Gunarto, views the increase in the BI-Rate to 5.5 per cent as an anticipatory step to maintain rupiah exchange rate stability and reduce the risk of external pressures that could impact domestic inflation and financial system stability.
“Amid rising global financial market volatility, particularly due to the escalation of geopolitical tensions and shifts in international capital flows, the strengthening of the monetary policy mix is expected to maintain the attractiveness of domestic financial assets while reinforcing investor confidence in the Indonesian economy,” Myrdal said in his publication in Jakarta on Tuesday.
Myrdal noted that the weakening of the rupiah exchange rate in recent weeks has increased the risk of imported inflation, especially for sectors with high dependence on raw materials, capital goods, and imported components.
Therefore, he believes the stabilisation measures taken by Bank Indonesia are expected to accelerate the market adjustment process while keeping inflation expectations under control.
From the economic growth perspective, IRRD Economic Research BTN assesses that domestic economic fundamentals remain relatively strong.
Various sectors supported by domestic activity, infrastructure development, the housing sector, food security, energy, downstreaming, and natural resource-based exports are expected to remain the engines of national economic growth throughout 2026.
“With support from sustained investment activity and banking intermediation, Indonesia’s economic growth is estimated to remain in the range of 5.2 per cent this year,” Myrdal said.
Nevertheless, Myrdal cautioned that the benchmark interest rate hike could potentially exert pressure on sectors sensitive to funding costs and public purchasing power.
Therefore, he noted, the balance between macroeconomic stability and support for economic growth will remain an important factor in the direction of future monetary policy.
“Going forward, we see that room for BI-Rate adjustments will be highly dependent on the development of the Rupiah exchange rate, inflation, foreign capital flows, and global economic dynamics,” Myrdal said.
Assuming external pressures begin to ease and exchange rate stability can be maintained, Myrdal estimates limited room for further interest rate hikes.
However, BI is expected to maintain policy flexibility to respond quickly and measurably to changes in market conditions.
On Tuesday, through the Weekly Board of Governors Meeting, BI decided to raise the BI-Rate by 25 basis points to the level of 5.5 per cent.
BI had recently raised the BI-Rate by 50 bps at the Monthly Board of Governors Meeting on 19-20 May 2026. BI is next scheduled to hold its Monthly Board of Governors Meeting on 17-18 June 2026.
At the end of May 2026, foreign exchange reserves were recorded at 144.9 billion US dollars, down 1.3 billion US dollars from the previous month, in line with government foreign debt payments and rupiah exchange rate stabilisation. In the last five months, foreign exchange reserves have shrunk by 11.6 billion US dollars from a position of 156.5 billion US dollars at the end of December 2025.
The Jakarta Interbank Spot Dollar Rate (JISDOR) on Tuesday (9/6) moved stronger to the level of Rp18,141 per US dollar from the previous Rp18,171 per US dollar on Monday (8/6).