Indonesia Holds Rates as Rupiah Remains Weak

Bank Indonesia unexpectedly kept its key interest rate at 5.75% at its July 22, 2026 meeting, defying market expectations of a 25-bps hike, after 25-bps increases at each of the previous two meetings aimed at shoring up the rupiah, while continuing to monitor price pressures amid persistent external risks and support economic growth. The central bank has raised rates by a total of 100 bps since May, bringing the policy rate to its highest level since April 2025 to attract foreign inflows and shore up the rupiah, which has come under pressure. The annual inflation rate accelerated to 3.34% in June from 3.08% in May, nearing the upper end of Bank Indonesia's 1.5%–3.5% target range. However, the central bank expects inflation to remain within the government's 2.5% ± 1% target range and has maintained its economic growth forecast of 4.9%–5.7% for 2026. Bank Indonesia also left the rates on its overnight deposit facility and lending facility unchanged at 4.75% and 6.5%, respectively.

Bank Indonesia raised its key interest rate by 25 bps to 5.75% at its June 18, 2026, meeting, as widely expected, following a 25 bps hike at an off-schedule meeting on June 9 aimed at supporting the rupiah, taming inflation, and supporting economic growth. The central bank has raised rates by a total of 100 bps since May, bringing the policy rate to its highest level since April 2025. The annual inflation rate surged to 3.08% in May from 2.42% in April, nearing the upper end of BI's 1.5%-3.5% target range. However, the central bank expects to keep inflation within the government's 2.5% ±1% target range and maintained its economic growth forecast of 4.9%-5.7% for 2026. Bank Indonesia also raised the rates on its overnight deposit facility and lending facility by 25 bps each, to 4.75% and 6.50%, respectively.

Bank Indonesia unexpectedly raised its key interest rates in an off-schedule meeting on June 9, 2026, as mounting external pressures weighed on the rupiah. The benchmark rate was lifted 25bp to 5.5%, alongside increases in the overnight deposit facility to 4.5% from 4.25% and the lending facility to 6.25% from 6%. Policymakers also unveiled measures to bolster the currency, including incentives to attract foreign investment. The package aims to stabilise the rupiah amid Middle East–driven volatility and keep inflation within target. Officials said the move reflects efforts to safeguard financial stability and sustain confidence in the economy against rising external risks. Sentiment was further supported as the dollar index eased from a nine-week high after Iran and Israel agreed to halt attacks, easing geopolitical tensions and improving risk appetite. Separately, Governor Perry Warjiyo projected the rupiah at 16,800–17,500 per U.S. dollar in 2027, with GDP growth seen at 5.1%–5.9%.