Will Bank Indonesia Raise Interest Rates Again? Here is HSBC's Prediction
The Bank Indonesia (BI) interest rate hike cycle is expected to soon enter its final phase. HSBC assesses that BI will likely raise the benchmark interest rate only one more time towards the end of 2026 before concluding the period of monetary tightening.
According to HSBC Chief Asia Economist & Co-head of Global Investment Research Asia, Frederic Neumann, BI has taken aggressive steps since the beginning of the year to maintain the stability of the Rupiah exchange rate. He believes that most efforts to dampen pressure on the Rupiah have already been implemented.
“We are almost at the end of the monetary tightening cycle in Indonesia. We have seen BI take very aggressive steps at the beginning of this year, so they have already undertaken most of the efforts to stabilise the Rupable exchange rate,” Frederic stated during the HSBC Indonesia Summit 2026 Media Briefing in South Jakarta on Tuesday (29/09/2026).
“We expect there to be one more interest rate hike towards the end of this year, but after that, the tightening cycle will end,” he explained.
Frederic explained that thanks to BI’s aggressive measures, the stability of the Rupiah exchange rate is now becoming visible and has proven capable of attracting foreign capital inflows back into the domestic financial market. Moving forward, the movement of the ‘Garuda’ currency is projected to be relatively limited.
“You have already seen stability in the Rupiah exchange rate and the return of capital inflows. Therefore, we expect that next year, the movement of the Rupiah exchange rate will remain within a relatively narrow range,” said Frederic.
He added that if there are policy adjustments outside of the benchmark interest rate hike, BI is expected to only need to utilise the Bank Indonesia Rupiah Securities (SRBI) instrument periodically to absorb liquidity.
“If there are policy changes outside of that one interest rate hike, BI might occasionally use SRBI to absorb some liquidity to adjust monetary conditions more precisely. However, this would only be a minor adjustment,” he noted.
Furthermore, Frederic emphasised that the monetary tightening implemented by BI will not hinder the pace of national economic growth. This is evident from the growth in bank credit distribution, which is actually accelerating for both investment and working capital.
“Does it hinder growth? We do not see such an impact. If we observe the growth of bank credit distribution, investment credit is actually experiencing significant acceleration, as is working capital credit,” he said.
“So, even with additional monetary tightening and a stable Rupiah exchange rate, the acceleration of bank credit growth indicates that the tightening measures taken are not excessive,” concluded Frederic.