Why did Bank Indonesia raise its key interest rate to 5.50%, and what were the main economic pressures cited?

Bank Indonesia raised its key interest rate by 25 basis points to 5.50% to strengthen the rupiah amid the impact of the Middle East war and to maintain inflation within the government’s target range of 1.5–3.5% for 2026–2027; the central bank cited the rupiah’s historic weakening (to Rp18,184/USD), rising annual inflation (3.08% in May, up from 2.42% in April), outflows of foreign portfolio investment, and soaring oil and gas imports—up 82.52% year-on-year in April—as key pressures driving the pre-emptive hike.

How has Indonesia’s foreign exchange reserves been affected by recent market interventions, and how does BI assess their adequacy?

Bank Indonesia drew down $1.3 billion from its financial buffers in May, bringing total foreign exchange reserves to a near two-year low of $144.9 billion; it has used around $12 billion year-to-date to defend the rupiah and service external government debts, yet BI states the remaining reserves are still robust enough to finance 5.6 months of imports—well above the international adequacy standard of about three months.

Indonesia Central Bank Raises Rates to 5.50% Amid Rising Oil Import Costs

Jun 9, 2026

Bank Indonesia raised its benchmark rate to 5.50% to stabilize the rupiah and curb inflation driven by soaring oil and gas import costs amid Middle East tensions.

icis

2026-06-09

Indonesia Central Bank Raises Rates to 5.50% Amid Rising Oil Import Costs

2026-10-20

Indonesia Must Address Rupiah Weakness Amid Capital Flight Risks

Indonesia Central Bank Raises Rates to 5.50% Amid Rising Oil Import Costs

FAQ