LPEM UI Suggests BI Hold Interest Rate at 5.5 Percent
The Institute for Economic and Social Research at the Faculty of Economics and Business, University of Indonesia (LPEM FEB UI), assesses that Bank Indonesia needs to maintain its benchmark interest rate, or BI-Rate, at 5.5 percent. BI is scheduled to announce its interest rate policy during the monthly board of governors’ meeting press conference today, Thursday, 18 June 2026.
In its analysis, LPEM highlighted that headline inflation increased to 3.08 percent year-on-year in May 2026 from 2.42 percent year-on-year in April 2026. “Although it remains within Bank Indonesia’s target range of 1.5 percent–3.5 percent, inflation risks from the food supply side and energy price adjustments still need to be monitored going forward,” said LPEM Researcher Teuku Riefky in the Macroeconomic Analysis Series, quoted on Thursday, 18 June 2026.
On Tuesday, 9 June 2026, Bank Indonesia raised interest rates outside the monthly meeting schedule by 25 basis points, continuing a 50 basis point increase in May. LPEM views this step as quite appropriate, given the ongoing rupiah weakening that reached its lowest level at Rp 18,000 per US dollar. The rupiah’s depreciation occurred amid rising investor concerns over domestic risks, including the establishment of Danantara Sumberdaya Indonesia (DSI).
According to Riefky, both the bond market and the stock market recorded foreign fund outflows. However, the stock market still recorded gains because domestic investors entered and pushed up the Jakarta Composite Index (IHSG). BI itself has raised the yield on SRBI (Bank Indonesia Rupiah Securities) as part of efforts to support the rupiah.
LPEM noted that foreign exchange reserves have declined by US$11.6 billion in the last five months, indicating that intervention in the foreign exchange market is still ongoing. In addition, LPEM considers the gradual policy tightening that has been underway since May, the continued foreign exchange intervention, and the need to evaluate the impact of recently taken measures. “Bank Indonesia needs to maintain its policy rate at 5.5 percent at the upcoming board of governors’ meeting,” said Riefky.