Bank Indonesia (BI) Governor Perry Warjiyo has emphasized that the decision to raise the benchmark interest rate, known as the BI Rate, during the May 2026 Board of Governors Meeting (RDG) was a carefully calculated move. Designed to prioritize economic stability and external resilience, the policy comes as a strategic response to ongoing global market volatility.
In a decisive move to fortify the economy, BI has officially increased its benchmark rate to 5.25 percent for May 2026. During the RDG press conference on Wednesday, May 20, Governor Perry expressed confidence that this policy shift would stabilize the rupiah, projecting a strengthening trend for the currency as early as July and August.
Governor Perry pointed out that the current value of the rupiah is undervalued. He reiterated that Indonesia’s economic fundamentals remain robust, supported by a low current account deficit, consistent economic growth, and well-managed inflation rates, among other key indicators. By tightening the benchmark rate, the central bank aims not only to bolster the national currency but also to anchor inflation between 2026 and 2027 within the government’s target range of 2.5 percent, plus or minus 1 percent.
“We are confident in our ability to keep inflation within the target range while ensuring that the impact on economic growth remains within the projected 4.9 to 5.7 percent corridor,” Perry explained. He further emphasized that the policy is designed to maintain ample liquidity in both the money and banking markets, thereby ensuring the overall stability of the financial system.
Beyond the primary benchmark rate, Bank Indonesia has also implemented adjustments to its complementary facilities. The deposit facility rate has been increased by 50 basis points to 4.25 percent, while the lending facility rate saw a corresponding rise of 50 basis points, reaching 6 percent. According to the Governor, these comprehensive measures are essential steps to drive sustainable economic growth while navigating global uncertainties.
Summary
Bank Indonesia has officially raised its benchmark interest rate to 5.25 percent to enhance economic stability and strengthen the rupiah against global market volatility. Governor Perry Warjiyo stated that the currency is currently undervalued and expects a strengthening trend by mid-2026, supported by robust national economic fundamentals.
This policy also aims to anchor inflation within the target range of 2.5 percent plus or minus 1 percent, while maintaining projected economic growth between 4.9 and 5.7 percent. Additionally, the central bank has adjusted its deposit and lending facility rates by 50 basis points to ensure financial system liquidity and sustainable growth.