Interest Rate Held at 5.75 Percent, BI: Global Pressures Have Not Subsided
Bank Indonesia (BI) has decided to hold its benchmark BI-Rate at 5.75 percent following the Board of Governors Meeting held on 18-19 August 2026. The move is intended to strengthen rupiah exchange rate stability amid global pressures that have not yet subsided, while balancing the policy mix to support national economic growth.
Acting Governor of BI, Destry Damayanti, stated that although the interest rate has been maintained for two consecutive months, the central bank continues to deploy various policy instruments to safeguard currency stability. One key focus is providing incentives to support capital inflows into the domestic financial market.
BI recorded that foreign portfolio investment flows in the third quarter of 2026 up to 14 August 2026 posted net inflows of US$1.8 billion. This was driven by the government’s global bond issuance as well as foreign funds entering Government Securities (SBN) and Bank Indonesia Rupiah Securities (SRBI).
To maintain the attractiveness of financial instruments, BI is providing hedging cost incentives. At the July 2026 Board of Governors Meeting, the sell swap hedging incentive was raised to 12.5 percent, while the incentive for sell Domestic Non-Deliverable Forward (DNDF) hedging was set at 15 percent.
“What we are doing is providing hedging cost incentives for incoming foreign funds, so that we can maintain an attractive spread,” Destry said at a press conference in Jakarta on Wednesday (19/8).
On the growth side, BI is strengthening its Macroprudential Liquidity Policy (KLM) to boost bank lending to priority sectors. Up to the first week of August 2026, total KLM incentives disbursed reached Rp446.5 trillion.
This policy has yielded positive results in banking intermediation performance. Bank lending in July 2026 grew 13.58 percent year-on-year (yoy), up from 12.67 percent (yoy) in June 2026.
In addition to maintaining liquidity, BI remains vigilant about the spillover effects of imported inflation. Coordination with central and regional governments through TPIP/TPID continues to be strengthened through the Inflation Control and Prosperous Food Movement (GPIPS).
BI has set the inflation target to remain within the range of 2.5 percent plus or minus 1 percent for 2026 and 2027. The decision to hold the Deposit Facility rate at 4.75 percent and the Lending Facility rate at 6.50 percent is considered consistent with efforts to maintain stability amid geopolitical turmoil in the Middle East that continues to overshadow global markets.