Bank Indonesia’s Board of Governors lifted the BI-Rate by 50 bp to 5.25% and raised the Deposit and Lending Facility rates to 4.25% and 6.00% respectively, citing the need for a “pro-stability” stance to shield the rupiah from heightened Middle-East-related global turmoil and to pre-emptively secure 2026-27 inflation within the 2.5 ± 1% target band. After cutting the policy rate by a cumulative 100 bp between May and September 2025 and holding it at 4.75% through April 2026, the central bank has now reversed course with its first hike in over a year. Implementation will feature more aggressive FX interventions via on- and offshore NDF, spot and DNDF markets, higher SRBI yields to lure portfolio inflows, and continued liquidity support to keep primary money growth above 10%. April CPI eased to 2.42% y/y, core inflation to 2.44%, while GDP expanded 5.61% y/y in Q1 and is projected at 4.9–5.7% for 2026; bank credit grew 9.98% y/y in April with CAR at 25.09% and NPLs at 2.14%. On the external front the goods trade surplus narrowed to USD5.5 bn in Q1, but foreign portfolio inflows of USD5.5 bn have returned since April; reserves held steady at USD146.2 bn (5.8 months import cover) and the rupiah stood at IDR 17,700 per USD, 2.2% weaker month-to-date. Global risks centre on the Strait of Hormuz closure, surging oil prices, firmer US rates and sustained dollar strength. The central bank pledges to maintain tight-leaning monetary settings, reinforce FX market measures and coordinate
Bank Indonesia2026-05-20
Bank Indonesia raises BI-Rate by 50 basis points to 5.25%
Bank Indonesia raised the BI-Rate by 50 bp to 5.25 %, also lifting the Deposit and Lending Facility rates to 4.25 % and 6.00 %, marking its first hike since 2025 to defend the rupiah and anchor 2026-27 inflation within the 2.5 ± 1 % target. The central bank signalled a persistently tight stance, combining stepped-up on- and offshore FX interventions, higher SRBI yields and liquidity support to attract portfolio inflows and sustain growth.