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Central Bank · Indonesia · Interest Rates · Rupiah
Bank Indonesia increased its benchmark seven-day reverse repo rate by 25 basis points to 5.75% on Thursday, extending its tightening cycle to support the rupiah and mitigate inflation risks from geopolitical volatility.
This move was largely anticipated by economists, with seven of nine polled by The Wall Street Journal expecting the 25-basis-point hike. The central bank also raised its overnight deposit facility rate to 4.75% and its lending facility rate to 6.50%.
Governor Perry Warjiyo stated the decision maintains rupiah stability amid global uncertainty and is a pre-emptive step to keep 2026-2027 inflation within the 1.5%-3.5% target. The rupiah has been one of Asia's worst-performing currencies this year, pressured by Middle East energy turmoil and domestic policymaking concerns.
Capital Economics' Gareth Leather suggests this may be the final hike for now, expecting rates to hold unless currency volatility re-emerges, with potential future pressure from MSCI's decision on Indonesia's market status and the Prabowo administration's policies. Barclays' Brian Tan also expects rates to hold in 2026, forecasting 25-basis-point rate cuts in March, April, May, and June 2027, bringing the policy rate to 4.75%.
