Energy Prices Rise Due to War, BI Assures Stability Is Maintained

The Bank Indonesia Board of Governors meeting in June 2026 decided to raise the benchmark interest rate by 25 basis points. This policy brings the BI Rate to 5.75%, following a cumulative increase of 100 basis points since May 2026. Senior Deputy Governor of Bank Indonesia, Destry Damayanti, stated that the interest rate policy is part of the central bank’s mandate to maintain the stability of Indonesia’s financial system. Amidst immense global pressures, BI is prioritising stability while still ensuring steps to encourage growth. The 100 basis point BI Rate hike, which is BI’s monetary instrument for maintaining stability, has been accompanied by the implementation of macroprudential policies through incentives for banks willing to channel credit to priority sectors, amounting to IDR 420 trillion. In the payment system, BI is providing transaction relief for MSMEs and deepening financial markets, steps expected to help maintain rupiah exchange rate stability. Global uncertainty is driving a strengthening of the Dollar Index and putting pressure on major global currencies, including the rupiah. Therefore, through the BI Rate increase, it is hoped that the attractiveness of rupiah instruments for foreign investors will improve, with net inflows into government bonds and Bank Indonesia Rupiah Securities reaching over IDR 103 trillion as of June 2026. BI also highlighted geopolitical developments in the Middle East impacting energy price rises, which in turn affect non-subsidised fuel prices and could stoke inflation. On the other hand, rising prices for other commodities such as coal present an opportunity to increase the country’s foreign exchange earnings.