Rupiah Approaches Rp 17,000 per US Dollar; Will Bank Indonesia Raise Interest Rates?

JAKARTA – The weakening value of the rupiah, which approached Rp 17,000 per US dollar in trading on Monday (9 March 2026), has sparked speculation that Bank Indonesia (BI) may raise its benchmark interest rate (BI-Rate) to contain pressure on the domestic currency.

Currency and commodities analyst Ibrahim Assuaibi believes raising the BI-Rate represents one potential option the central bank may pursue to stem the weakening of the rupiah. According to him, if the central bank does not implement monetary tightening measures, efforts to maintain stability in the rupiah’s exchange rate risk becoming ineffective.

Assuaibi has previously projected that the rupiah could weaken to around Rp 17,400 per US dollar. The current breach of the Rp 17,000 level is viewed as confirming the pressure on Indonesia’s currency, influenced by various global factors.

“If Bank Indonesia maintains its interest rate at current levels, this approach will prove ineffective because, based on my own projections made last November, the rupiah will likely reach Rp 17,400,” he explained.

Should BI raise its benchmark rate, the effects would immediately be felt in the banking sector’s lending rates. Increases in the benchmark rate are typically followed by rises in bank lending rates. This situation affects the public’s ability to access financing, particularly for property purchases and consumer credit.

“What Bank Indonesia will likely do is raise interest rates. If lending rates increase, it means people who want to buy property and other goods will face difficulties in paying,” Assuaibi noted.

The analyst further believes that the current global economic environment, facing significant pressures, increases the risk of domestic economic slowdown. Global uncertainties, ranging from rising energy prices to geopolitical tensions in the Middle East, are seen as potentially impacting Indonesia’s economy. There is even a possibility that the national economic growth target, projected at around 6 per cent, may not be realised if global economic pressures persist.

It should be noted that BI decided to maintain the BI-Rate at 4.75 per cent during its Board of Governors meeting held on 18-19 February 2026.