BI hikes rate by 25 bps to stabilize rupiah amid global tensions

Jakarta (ANTARA) - Bank Indonesia (BI) decided to raise its benchmark interest rate by 25 basis points to 5.75 percent to maintain the stability of the rupiah exchange rate amid lingering global geopolitical tensions.

The decision, announced at the conclusion of the central bank’s Board of Governors' Meeting, also saw the Deposit Facility and Lending Facility rates increase by 25 basis points to 4.75 percent and 6.50 percent, respectively.

“This increase is a further step to strengthen the stabilization of the rupiah exchange rate amidst persistently high global uncertainty,” BI Governor Perry Warjiyo stated at a press conference on Thursday.

He added that the rate hike also serves as a preemptive measure to keep inflation within the government's target corridor of 2.5±1 percent for both 2026 and 2027.

According to Warjiyo, the policy tightening is well-aligned with macroprudential and payment system policies, which continuously support domestic economic growth.

"Payment system policy remains directed at supporting economic activity by expanding digital payment acceptance, strengthening the payment system industry structure, and increasing the reliability and resilience of payment system infrastructure," he explained.

The central bank expects the higher BI Rate to attract foreign capital into the Indonesian financial market, particularly via Bank Indonesia Rupiah Securities (SRBI) and Government Securities (SBN), thereby boosting demand for the rupiah.

BI recorded a net foreign capital inflow of US$3.9 billion in the second quarter of 2026, as of June 15. This marked a sharp reversal from the first quarter of 2026, which saw a net foreign capital outflow of US$0.8 billion.

Despite a slight easing of geopolitical friction following an interim agreement between the United States and Iran on June 14, Warjiyo emphasized that global monetary uncertainty remains high.

The broader Middle East conflict, which erupted in late February 2026, has severely fractured global production, distribution networks, and trade supply chains.

As a result, global economic growth for 2026 is projected to remain low at 3.0 percent, while global inflation is expected to climb to approximately 4.4 percent.

The current global economic landscape has prompted several central banks to increase their policy rates. BI is also closely monitoring potential future hikes to the US Fed Funds Rate driven by higher inflation prospects in the US.

Furthermore, high US Treasury yields, which stood at 4.49 percent for the 10-year tenor and 4.18 percent for the two-year tenor as of June 17, 2026. This, combined with a strengthening US dollar index, have caused global capital to favor safe-haven assets in developed countries over developing nations.

Given the dynamic nature of the US-Iran negotiations, Warjiyo emphasized the need for continued vigilance and strong synergy between fiscal and monetary policies.

”This is necessary to strengthen external resilience, maintain stability, and stimulate domestic economic growth," the central bank governor concluded.

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Translator: Bayu Saputra, Yashinta Difa

Editor: Arie Novarina

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