JAKARTA - The Indonesian Overnight Index Average (INDONIA) interest rate has recorded a downward trend since it was officially implemented on January 1, 2026.
Based on Bank Indonesia (BI) data, INDONIA was at 4.00 percent on January 2, 2026, falling to 3.90 percent on January 5, 2026, and weakening again to 3.84 percent on January 6, 2026.
BI Director of Financial Market Development Arief Rachman emphasized that the movement of INDONIA cannot be used as an indicator of the direction of interest rate policy in the future, but only reflects the conditions of the money market in a certain period.
Arief explained that INDONIA is formed from real transactions that occur in the market, so its movement is very influenced by market dynamics and factors.
"INDONIA does not reflect whether the interest rate will later go down or up. It is solely (average) the price in the market. This means it is more influenced by other factors, for example, liquidity in the market is ample. If there are many, the price will go down," he said in a media briefing, Wednesday, January 7.
Apart from liquidity, Arief said market participants' expectations also influenced the movement of INDONIA and when the market expected the potential for interest rate cuts in the future, interbank transactions could occur at a lower interest rate.
However, Arief emphasized that this condition is not directly related to the direction of BI's monetary policy.
"INDONIA that fell does not reflect that later on it will fall again. It only reflects the current market conditions. So it does not reflect BI's policy going forward," he explained.
Arief explained that INDONIA is considered more precise, objective, and able to reflect the actual liquidity conditions of the market.
According to him, the implementation of INDONIA is also part of the reform of the reference interest rate which follows international best practices to deepen and strengthen the Indonesian financial market.
According to Arief, INDONIA offers a higher level of transparency and credibility so that it is worth being a reference by market participants.
"So what we are doing in Indonesia, when we stop JIBOR, introduce INDONIA, this is part of the global benchmark reform in the world. So it's not BI's cleverness, but this is a reform in the global financial market," he said.
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