JAKARTA - Bank Indonesia (BI) Governor Perry Warjiyo explained the reason behind the decision to raise the benchmark interest rate (BI Rate) by 25 basis points to 5.50 percent.
The policy was taken outside the regular schedule of the monthly Board of Governors (RDG) meeting in response to the increasing pressure on the rupiah exchange rate.
According to Perry, the weakening of the rupiah against the US dollar occurred deeper than previously estimated, and the results of the latest evaluation showed that the exchange rate movement was not in line with the projections that had been set.
"In various evaluations today we see, hey, the weakening of the rupiah exceeds what we projected before," he told the media after attending a working meeting with the Budget Agency of the Indonesian House of Representatives, Tuesday, June 9.
He added that through this increase in the BI Rate, BI hopes that the stability of the rupiah exchange rate can be maintained and even has the potential to strengthen.
In addition, Perry said that this step was also aimed at ensuring that inflation remained within the target of 2.5 percent plus minus 1 percent.
In addition to maintaining the stability of the rupiah and inflation, he added that the interest rate hike is also expected to increase the attractiveness of foreign portfolio investment, because in recent times the domestic financial market has experienced capital outflow from foreign investors.
"So we need to raise the BI-Rate so that the rupiah strengthens, stabilizes, and the inflation next year remains within the target," said Perry.
Previously, Perry said this increase was a follow-up step to strengthen the stabilization of the rupiah exchange rate from the impact of high global turmoil due to the war in the Middle East.
He added that this increase was also a pre-emptive step to keep inflation in 2026 and 2027 within the target range of 2.5 percent plus minus 1 percent set by the Government.
According to him, this policy is also aimed at increasing the yield for the attractiveness of foreign portfolio investment inflows into Indonesia.
"In accordance with the law and the practice that has been running so far, Bank Indonesia holds a Weekly RDG every Tuesday to evaluate the implementation of the mix of policies set out in the Monthly RDG," he explained.
According to him, in the evaluation since the Monthly RDG on May 19-20, 2026, the rupiah exchange rate showed a weaker development than expected.
He added that the weakening was also caused by the continued global turmoil and high domestic foreign exchange demand, the weakening was also driven by the outflow of foreign portfolio investment from Indonesia.
"In connection with this, Bank Indonesia considers it necessary to take further steps to strengthen the stabilization of the Rupiah exchange rate by increasing returns and a number of other incentives to encourage the entry of foreign investment flows," he explained.
Perry also added that the stabilization of the rupiah exchange rate was also taken to ensure that the external resilience of the Indonesian economy was maintained and the inflation targets for 2026 and 2027 were achieved.
The English, Chinese, Japanese, Arabic, and French versions are automatically generated by the AI. So there may still be inaccuracies in translating, please always see Indonesian as our main language. (system supported by DigitalSiber.id)
