Luhut Deems 5.5% Interest Rate Hike Appropriate Amid Middle East War Threat

National Economic Council (DEN) Chair Luhut Binsar Pandjaitan considers Bank Indonesia’s (BI) decision to raise the benchmark interest rate to 5.50 per cent a precise move to maintain national economic stability amid heightened global uncertainty. While some market participants have questioned the decision made during a weekly Board of Governors Meeting, Luhut views the policy as a necessary anticipatory step to ease pressure on the rupiah and maintain macroeconomic stability. “It’s good, it’s braking,” Luhut said when met at the Presidential Palace complex in Central Jakarta on Tuesday, 9 June 2026. When asked about BI’s decision, which some circles deemed sudden, Luhut dismissed the notion. According to him, Indonesia’s fundamental economic condition is still in good shape. “No. Our economy is fine, fundamentals are still okay, but we do need to pay attention to several points because this Gulf war, this Hormuz war, is still ongoing,” he said. The continuing conflict in the Middle East region, particularly its impact on the strategic Strait of Hormuz, is a source of uncertainty that the government continues to monitor. Bank Indonesia previously decided to raise the BI-Rate by 25 basis points to 5.50 per cent. In addition, the Deposit Facility interest rate was also raised to 4.50 per cent and the Lending Facility to 6.25 per cent. Executive Director of Bank Indonesia’s Communication Department Ramdan Denny Prakoso explained that the policy was pursued as a follow-up measure to strengthen stabilisation of the rupiah exchange rate, which is under pressure from global turmoil due to the war in the Middle East. “This increase is a follow-up measure to strengthen the stabilisation of the rupiah exchange rate from the impact of high global turmoil due to the war in the Middle East, as well as a pre-emptive step to keep inflation in 2026 and 2027 within the Government’s target range of 2.5±1 per cent,” said Ramdan.