The Middle Class Pays a High Price for Stability
In one month, the interest rate has been raised three times with a total increase of 100 basis points. As a result, the middle class must bear the high costs of stability.
By Agustinus Yoga Primantoro
19 Jun 2026 07:00 WIB · English
JAKARTA, KOMPAS — The benchmark interest rate has been raised to 5.75 percent. Although viewed as a necessary step to strengthen stability, this policy comes at a high cost that must be borne by the public, particularly the middle class.
Bank Indonesia (BI) on Thursday (18/6/2026) decided to raise its benchmark interest rate by 25 basis points (bps) to 5.75 percent. Within just one month, the interest rate has been increased three times, totaling 100 bps.
In the May 2026 monthly Governor’s Board Meeting (RDG), BI raised the benchmark interest rate by 50 basis points to 5.25 percent. This policy was subsequently followed by an increase of 25 basis points decided through a weekly RDG on June 9, 2026.
On the same day, the central bank of the United States, the Federal Reserve (The Fed), decided to maintain its policy interest rate at the level of 3.5-3.75 percent. Consequently, the gap between the interest rate of Bank Indonesia and The Fed is now 200 basis points, the widest in the last four years.
All of these decisions were made as a follow-up step to further strengthen the stabilization of the rupiah exchange rate amid the continued high global uncertainty. Furthermore, the interest rate policy was also implemented to keep inflation within the government’s target of 1.5-3.5 percent.
Nevertheless, the exchange rate of the rupiah in the past month has still been on a weakening trend. Citing data from the Jakarta Interbank Spot Dollar Rate (Jisdor), the rupiah’s exchange rate against the US dollar weakened by 0.9 percent, from Rp 17,666 on May 18, 2026, to Rp 17,826 on June 18, 2026.
The Chief Economist of Bank Permata, Josua Pardede, stated that Bank Indonesia is sending a strong signal that the stability of the rupiah exchange rate and the control of inflation expectations will be the main priorities amid the persistently high global uncertainty that has not yet abated.
The decision of the RDG in June 2026 is a prudent step to maintain stability, but it is not without cost. BI needs to be cautious to ensure that the increase in interest rates does not become excessive pressure on credit, consumption, and investment.
In this case, the pressure arises from the Middle East conflict, the risk of rising global inflation, the potential increase in US interest rates, high yields on US bonds, and the strengthening of the US dollar. This poses a risk of foreign capital easily exiting the financial markets of emerging countries, including Indonesia.
“The decision of the RDG in June 2026 is the right step to maintain stability, but it is not without cost. BI needs to be cautious so that the increase in interest rates does not become excessive pressure on credit, consumption, and investment,” he said when contacted from Jakarta.
According to him, the main risk of this decision is the increase in borrowing costs in the real sector. Data on the Basic Credit Interest Rate (SBDK) shows that the average interest rate for rupiah loans slightly decreased, from 8.73 percent in April 2026 to 8.72 percent in May 2026.
However, the new credit interest rates have actually risen quite sharply, from 8.95 percent to 9.31 percent, which was also followed by an increase in third-party fund interest rates. This means that the tightening transmission is beginning to affect new credit prices, particularly as banks start to adjust funding costs and risk perceptions.
“If it continues, new credit for consumption, working capital, MSMEs (micro, small, and medium enterprises), housing loans, vehicle loans, and labor-intensive sectors may slow down more quickly than expected,” said Josua.
Therefore, he recommends that BI maintain its benchmark interest rate at 5.75 percent while strengthening the stabilization of the rupiah through intervention and market deepening, ensuring banking liquidity for the productive sector, and enhancing fiscal-monetary coordination.
On the other hand, an increase in interest rates will only be effective if supported by the credibility of fiscal policy. This means that the government needs to maintain fiscal discipline, control non-essential spending, manage the deficit, and ensure that energy subsidies do not burden fiscal policy if oil prices remain high.
In response to the interest rate policy, the Chairman of the Indonesian Employers Association (Apindo), Shinta W Kamdani, stated that macroeconomic stability is indeed an important prerequisite for the sustainability of investment and business activities.
However, the business world is also concerned that consecutive interest rate increases over a relatively short period will have consequences for the real sector. The increase in the cost of funds will ultimately impact business financing costs, both for working capital and investment.
“Stability must indeed be maintained, but at the same time, the momentum of investment, job creation, and the competitiveness of the business world also need to remain a shared concern,” he said.
Moreover, the business world currently faces challenges such as slowing global demand, pressure on production costs, and various high-cost economic components. As a result, opportunities for business expansion are increasingly limited.
According to Shinta, the business world is essentially capable of making adjustments as long as the direction of policy can be projected well. However, if interest rates rise again to 6 percent, the impact will affect financing costs, investment expansion, and domestic demand.
Consequently, the business world will recalibrate its expansion plans, postpone new investments, and become more selective in capital expenditure.
In other words, the increasing cost of financing cannot be ignored. Interest rate increases will be gradually passed on to working capital an