Economist Says Room Remains for BI Rate Hike if Rupiah Weakens Beyond This Level

Economists believe there is still room for further increases to the BI-Rate in the future. This would occur if the Rupiah exchange rate remains under pressure above the level of Rp18,200 per US Dollar and the current account deficit exceeds 1.5 per cent of GDP.

Bank Danamon economist Hosianna Evalita Situmorang views Bank Indonesia’s (BI) decision to raise the BI-Rate during today’s Weekly Board of Governors Meeting as a positive and preemptive step to maintain exchange rate stability.

“Yes, further increases (to the BI-Rate) could continue if the Rupiah remains under pressure above Rp18,200 (per US Dollar) and the current account deficit widens beyond 1.5 per cent of GDP,” Hosianlar said in Jakarta, as reported on 10 June 2026.

According to her, the Rupiah has weakened by as much as 8 per cent year-to-date against the US Dollar when the exchange rate reached Rp18,190 per US Dollar; therefore, this intervention is crucial to mitigate the risks of imported inflation and its subsequent impacts.

Hossiana also noted that the BI-Rate increase announced today was immediately met with a positive market response, as reflected by the Rupiah strengthening by 0.7 per cent to the level of Rp18,070 in the spot market on Tuesday afternoon. “Furthermore, this policy is projected to boost the yield attractiveness of domestic instruments,” said Hosianna.

During Tuesday’s Weekly Board of Governors Meeting, BI decided to raise the benchmark interest rate (BI-Rate) by 25 basis points (bps), bringing it to the 5.5 per cent level.

In conjunction with this, the deposit facility and lending facility rates were also raised by 25 bps each, to 4.50 per cent and 6.25 per cent, respectively.

In its press release, BI also announced measures to strengthen Rupiah stabilisation, including increasing the SRBI interest rate structure for all, providing incentives through the reduction of hedging swap rates for foreign investors, reopening the repo instrument auction window for banks, and increasing the intensity of monetary operations for both Rupiah and foreign exchange.

Bank Indonesia recently raised the BI-Rate by 50 bps during the Monthly Board of Governors Meeting on 19-20 May 2026. The May 2026 hike served as the first adjustment after the benchmark rate had been maintained at 4.75 per cent since September 2025. Throughout 2025, BI had previously cut the benchmark rate five times, with a total reduction of 125 bps.