Reference Interest Rate Predicted to Remain at 4.75 Per Cent Amid Global Pressures
Multiple economists estimate that Bank Indonesia (BI) will maintain the BI-Rate at 4.75% in its March 2026 Board of Governors meeting, with this prediction emerging amid continued strong external pressure on the rupiah’s value.
David Sumual, Chief Economist at BCA, stated that rupiah stability has become the primary consideration in determining the reference interest rate. “External pressure remains quite strong and the attractiveness of rupiah assets needs to be maintained,” he said.
According to Sumual, pressure on the rupiah continues to be significantly influenced by geopolitical tensions between the United States and Iran, as well as prospects for Indonesia’s sovereign rating going forward.
Faisal Rachman, Department Head of Macroeconomic and Financial Market Research at Permata Bank, assessed that a prolonged conflict could drive increases in global oil prices and inflation, thereby narrowing the scope for interest rate reductions. He noted that the market currently expects the Federal Reserve to cut interest rates only once in 2026, likely towards year-end.
“If the Fed cuts interest rates only once, it is likely BI will do the same,” he said.
However, Rachman cautioned that should geopolitical tensions escalate and oil prices remain above 100 US dollars per barrel, the chances of rate cuts would diminish further, potentially shifting towards a more restrictive policy stance.
Similar views were expressed by M Rizal Taufikurahman, Head of the Macroeconomic and Finance Centre at Indef, who believed opportunities for rupiah strengthening still exist but remain overshadowed by external factors in the short term. According to him, exchange rate stability would be stronger if global conditions improve and domestic fundamentals such as fiscal health, inflation, and policy credibility are maintained.
Teuku Riefky, economist at LPEM FEB UI, noted that foreign capital outflows totalled 0.63 billion US dollars over the past 30 days until 12 March 2026, and 0.75 billion US dollars since the US-Iran conflict erupted. Correspondingly, government bond yields have risen across both short and long-term tenors, reflecting increased market uncertainty.
Riefky explained that the yield increases demonstrate that the market has begun anticipating risks to Indonesia’s economic prospects in the short term, particularly owing to exchange rate pressures and the potential deterioration of fiscal conditions due to rising oil prices.
As of 13 March 2026, the rupiah had depreciated approximately 1.6% year-to-date and around 3.64% year-on-year against the US dollar. Nevertheless, the rupiah’s depreciation is considered relatively moderate compared to other emerging markets, reflecting Bank Indonesia’s active efforts to maintain exchange rate stability.
Riefky also cautioned that interest rate cuts under current conditions risk widening pressure on the rupiah and increasing inflation risks, particularly from rising energy prices.