Indonesia Leaves Rates as Expected

Bank Indonesia (BI) kept its key interest rate at 5.75% for the second straight meeting at its August 19 meeting, as expected, following a 50-bps hike in June to shore up the rupiah, which has strengthened recently. The decision came amid concerns about the central bank's independence from political influence following Perry Warjiyo's sudden resignation as BI chief last month and the appointment of Senior Deputy Governor Destry Damayanti as interim chief. BI 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. The annual inflation rate eased to 2.88% in July, remaining within BI's 1.5%–3.5% target range. BI expects inflation to remain within the government's 2.5% ± 1% target range and has maintained its GDP growth forecast of 4.9%–5.7% for 2026. BI also left the rates on its overnight deposit facility and lending facility unchanged at 4.75% and 6.5%, respectively.

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.