Impact of BI Rate Rise: Loans More Expensive, Deposits Could Rise

Bank Indonesia has officially raised its policy rate, the BI Rate, by 50 basis points to 5.25 percent in a Board of Governors’ Meeting (RDG) held on 19-20 May 2026. The move marks the first hike in two years and signals a shift in BI’s monetary policy stance toward stabilising the economy rather than stimulating growth. Governor Perry Warjiyo said the rate hike was intended to reinforce stabilisation of the rupiah amid heightened global volatility.

“This increase is a continuation of steps to strengthen the rupiah’s stabilisation against the impact of the high global volatility due to the war in the Middle East,” said Perry.

According to Perry, the policy direction had already shifted prior to the RDG. “In 2025 monetary policy was oriented towards prosperity and growth. But with the current global environment, monetary policy cannot be pro-growth anymore. It must return to stability,” he said.

“Why did we cut rates five times last year? Because there was no outflow at that time,” Perry explained.

The rupiah’s weakness remains the central bank’s primary concern as a weaker currency could trigger imported inflation. Nevertheless, BI has maintained its accommodative macroprudential policy to support growth. The central bank had previously projected Indonesia’s 2026 growth to be in the range of 4.9% to 5.7%.

Reuters noted that the rupiah had weakened by around 6 percent this year and briefly touched a low against the US dollar.