Indonesia Raises Policy Rates By 50 Bps

(RTTNews) - Bank Indonesia raised its benchmark interest rates by a larger-than-expected half percentage points on Wednesday, as it struggles to stabilize the rupiah exchange rate amid geopolitical tensions.

The board of governors, governed by Perry Warjiyo, decided to hike the BI rate by 50 basis points to 5.25 percent.

This was the first rate hike since April 2024. Markets anticipated only a quarter-point increase. The bank has reduced its interest rates by 150 basis points since September 2024.

The deposit facility rate was lifted to 4.25 percent and the lending facility interest rate to 6.00 percent.

The rate hike is intended to stabilize the rupiah exchange rate amid the geopolitical tensions. The decision serves as a pre-emptive measure to maintain inflation within the target range of 1.5 to 3.5 percent in 2026 and 2027.

The bank projected economic growth between 4.9 percent and 5.7 percent this year, unchanged from the previous outlook.

Although inflation eased to 2.42 percent in April, soaring oil and other commodity prices resulting from the war in the Middle East could drive higher domestic inflation, the bank said.

The bank underscored that it will continue to strengthen its monetary policy mix to keep inflation under control.