Foreign Media Spotlight Bank Indonesia's Surprise Rate Hike, Report These Details
Foreign media have highlighted Bank Indonesia’s move on Tuesday to raise the BI Rate to 5.5%. Several global news agencies scrutinised the manoeuvre by Indonesia’s central bank.
CNBC International, in an article titled ‘Indonesia raises rates in surprise move as rupiah lingers near record lows’, reported that the emergency decision lifted the benchmark BI Rate by 25 basis points from 5.25%. This policy, it wrote, was highly surprising for global financial markets because economists participating in polls had previously expected Indonesia to hold its interest rates.
Another crucial point reported was the massive capital flight currently hitting the domestic stock market. This dire condition occurs simultaneously with the rupiah’s drastic weakening against the US dollar.
To prevent a more severe fall, Jakarta has reportedly depleted its foreign exchange reserves, causing them to drop to their lowest level in almost two years. Such a massive market intervention was forced upon them to support the stability of the Garuda currency from economic shocks.
‘The surprise rate hike brings the 7-day reverse repo rate to 5.5% from 5.25%,’ wrote journalist Lim Hui Jie in her latest report on the sudden change in Indonesia’s monetary policy.
Meanwhile, British media outlet Reuters, in its report titled ‘Indonesia hikes rates in surprise off-cycle move to prop up sinking rupiah’, highlighted the rare move scheduled outside the routine, the first of its kind in eight years. This adjustment was considered extremely urgent because the rupiah exchange rate had weakened far deeper than initial projections since the official meeting last May.
‘This rate hike is a follow-up measure to strengthen the stabilisation of the rupiah exchange rate against the impact of high global volatility due to the war in the Middle East and a pre-emptive step to keep inflation for 2026 and 2027 within the target range,’ Bank Indonesia asserted in its written statement to Reuters.
Reuters also added reports that aggressive intervention in the currency market had drained Indonesia’s foreign reserves. This decline occurred despite the government having conducted a sale of US dollar and euro-denominated bonds worth US$3.5 billion (Rp63 trillion) last month.
On the other hand, Singapore-based foreign media outlet Channel News Asia published a report titled ‘Indonesia raises rates in surprise move to prop up sinking rupiah’, reviewing global investors’ concerns about the domestic economy. The rupiah continues to be battered by heavy pressure due to market concerns over the massive spending plans in President Prabowo Subianto’s government budget and the ballooning fuel subsidy budget following the outbreak of the Iran war.
‘For this matter, perhaps we do need to be more aggressive because if we look at the SRBI level, it is already at 7.25%, which is even higher,’ Bank Central Asia Chief Economist David Sumual told the outlet regarding the competitiveness level of the domestic capital market.
Despite this, Bank Indonesia Governor Perry Warjiyo stated that Indonesia’s foreign exchange reserves are currently still more than adequate to continue stabilising the rupiah. Warjiyo projected the rupiah exchange rate will move within the range of 16,800 to 17,500 per US dollar in 2027, with stability maintained tightly through foreign exchange market intervention.