Economists Applaud BI's Decision to Hold Interest Rate

The Bank Indonesia (BI) Board of Governors’ Meeting decided to maintain the BI-Rate at 5.75%, the Deposit Facility rate at 4.75%, and the Lending Facility rate at 6.50%. In response, Bank Permata Chief Economist Josua Pardede stated that the decision to hold the BI Rate was a positive step to support rupiah stability while maintaining economic growth momentum. “In line with our expectations, BI held the BI Rate at 5.75% at the July 2026 Board of Governors’ Meeting, despite market expectations of a hike to 6.00%,” Josua said. He noted that the central bank reaffirmed its commitment to monitoring inflationary pressures amid persistent external risks. BI indicated that the cumulative 100 basis points of rate hikes implemented during May-June 2026 were currently deemed sufficient to anchor rupiah stability and inflation expectations. Josua added that future BI Rate decisions will remain highly dependent on global and domestic developments. From the external side, pressures have increased due to renewed geopolitical tensions in the Middle East, which have pushed global oil prices back above US$90 per barrel, reigniting concerns over global inflation. Domestically, S&P’s decision to maintain Indonesia’s credit rating with a stable outlook has bolstered investor confidence and supported foreign capital inflows. The rupiah also recorded a strengthening to Rp17,885 per US dollar on 21 July 2026. Josua’s baseline projection remains that BI will hold the rate at 5.75% until the end of 2026, though he does not rule out additional tightening if global conditions deteriorate further. Similarly, Bank Tabungan Negara economist Myrdal Gunarto said the decision to hold rates provides room for the real sector to accelerate. He noted that consumer confidence, retail sales, and the Manufacturing PMI indicate continued economic growth above 5.15% this year. Myrdal added that Indonesia’s monetary ammunition remains strong, supported by robust foreign inflows via SRBI and rising foreign exchange reserves, alongside resilient economic fundamentals and a stable sovereign rating.