Warning of Global Pressure Impact: Analyst Says BI Rate Could Rise 200 Bps by End of 2026

Bank Indonesia’s decision to raise its benchmark interest rate to 5.50 percent has been appreciated by market participants, according to economic and money market analyst Ibrahim Assuaibi. Ibrahim assessed that the move was quite appropriate to curb pressure on the rupiah, which has been continuously affected by global turmoil and dynamics, leading to capital outflows. He said the timing of the rate hike was very precise, as it came amid global geopolitical tensions that are beginning to show signs of easing. “The momentum is very good, because geopolitical tensions have slightly subsided due to Trump’s statement urging Iran and Israel not to attack each other again,” Ibrahim said. Ibrahim argued this step provides room for BI to send a strong signal to the market that Indonesia is serious about maintaining exchange rate stability and controlling inflation amidst global uncertainty. He explained that the primary goal of the rate hike is to maintain rupiah stability while anticipating the risk of rising inflation expected from higher import prices. “This interest rate hike aims to stabilise the rupiah currency and keep inflation in check,” Ibrahim said. “Because we see that inflation is likely on a monthly basis. This month, it is also likely to experience an increase, due to the impact of rising prices of imported goods.” Nonetheless, Ibrahim also cautioned that the burden of maintaining economic stability cannot be borne by BI alone. He said the government must also issue aligned policies to help the rupiah deliver stronger and more sustainable results. “BI’s policy of raising interest rates is quite good. Now, it’s a matter of how government policies work together with Bank Indonesia to stabilise the rupiah,” he said. Ibrahim further warned of the possibility that BI might need to take more aggressive steps should the global situation worsen again in the coming months.