The central bank hiked rates unexpectedly to counter rupiah volatility and inflation pressures amid global uncertainty.
Bank Indonesia increased its benchmark interest rate by 50 basis points to 5.25%, a move aimed at stabilizing the rupiah amid heightened global volatility. The decision surprised markets, which had not anticipated such aggressive tightening.
The central bank targets inflation within a 1.5–3.5% range for 2026–2027 and forecasts GDP growth of 4.9-5.7% for 2026. A modest current account deficit of 0.5-1.3% of GDP is also projected for next year. Governor Perry Warjiyo emphasized enhanced FX interventions and improved monetary tools to support the currency.
The hike reflects pre-emptive measures to mitigate risks from global energy prices and geopolitical tensions, particularly in the Middle East.