SMF projects BI-Rate could reach 6.75 percent by end of year

PT Sarana Multigriya Finansial (SMF) Chief Economist Martin Daniel Siyaranamual stated that the company projects the BI-Rate will reach 6.75 percent by the end of 2026, with a moderate scenario placing it at 6.25 percent. “The BI-Rate will most likely, based on our projections, reach 6.75 percent by the end of 2026,” he said during the SMF First Semester 2026 Performance Press Conference in Jakarta on Wednesday. According to him, Bank Indonesia must take an aggressive stance to alleviate pressure on the rupiah exchange rate. This would signal to foreign investors that investing in Indonesia is more attractive amid increased demand for US dollars. The impact of a potential rate hike includes more expensive People’s Housing Credit (KPR) rates and a higher cost of funds. He noted that while the monetary authority must be aggressive, the yield on Government Securities (SUN) is also trending upwards, suggesting that the central bank must increase its debt offerings or offer more attractive yields. The rise in SUN yields affects the entire financial services industry, including SMF. Martin explained that when SMF issues bonds, the reference is SUN, making it impossible for their rates to be lower. The domestic financial market is still in an adjustment phase amid Middle East conflicts and MSCI’s evaluation of market accessibility. Throughout the period up to 17 July 2026, the Jakarta Composite Index (IHSG) corrected from around 8,000 to 6,176, influenced by increased foreign selling pressure. Simultaneously, the rupiah exchange rate depreciated, briefly touching Rp18,200 per US dollar before strengthening to Rp17,944 by 17 July 2026. These movements reflect high market sensitivity to foreign capital flows, including investor responses to the MSCI review highlighting accessibility and efficiency aspects of the Indonesian capital market. However, the stabilisation of the rupiah and a rebound in the IHSG in June indicated improving market perceptions as policy responses strengthened and external pressures eased. Indonesia’s foreign exchange reserves declined from USD 154.58 billion in January 2026 to USD 145.6 billion in June 2026, influenced by government external debt payments and Bank Indonesia’s stabilisation measures. The central bank had previously lowered the BI-Rate to 4.75 percent by the end of 2025 and maintained it until April 2026, before raising it by 100 basis points to 5.75 percent by June 2026. SMF’s Economic Research Division projects further increases of 25 basis points each, up to four times, by the end of 2026.