Mucahithan Avcioglu

18 June 2026•Update: 18 June 2026

Indonesia’s central bank raised its key interest rate for a third time in about a month on Thursday, continuing its policy tightening cycle amid global market volatility and pressure on emerging-market assets.

Bank Indonesia lifted its benchmark BI-Rate by 25 basis points to 5.75%, while also raising the deposit facility rate to 4.75% and the lending facility rate to 6.50%.

The bank said the decision was aimed at strengthening stability while supporting economic growth.

The latest move followed a surprise 25-basis-point increase on June 9 and a bigger-than-expected 50-basis-point hike in May, bringing total tightening this year to 100 basis points.

Bank Indonesia said the increase was also intended to strengthen the rupiah and attract foreign portfolio investment inflows, as policymakers seek to contain the impact of global uncertainty on domestic financial markets.

The rupiah pared most of its losses after the decision, while yields on 10-year government bonds rose. Indonesian stocks, however, remained lower, declining around 1.5%.

Before Thursday’s decision, the rupiah had recovered around 2% from a record low after last week’s surprise rate hike.

Bank Indonesia Governor Perry Warjiyo said at a briefing that the rupiah is expected to continue stabilizing, supported by the central bank’s policy measures and Indonesia’s strong economic fundamentals.

The rate decision came after the US Federal Reserve left interest rates unchanged but signaled support for possible rate increases later this year, adding pressure on emerging-market currencies and assets.

Warjiyo said Bank Indonesia sees the possibility of further Fed rate hikes to tame inflation, noting that US Treasury yields continue to rise.

Market watchers have warned that higher interest rates alone may not be enough to secure sustained capital inflows unless they are supported by clearer communication, more predictable regulation and market-friendly fiscal policy.

Concerns have also grown after the Indonesian government unveiled plans for a new state-backed commodity export agency, raising questions about possible market intervention and disruptions to export flows that support the rupiah.

Higher food and energy costs, together with the delayed impact of currency weakness on imported goods, have increased risks that inflation could become more persistent in the coming months.