BI holds benchmark rate at 5.75% in September to stabilize rupiah
Bank Indonesia holds its benchmark rate at 5.75% in September as global uncertainty and rupiah pressure keep currency stability in focus.
Source: Jakarta Globe · September 23, 2026 at 4:32 PM · AI-assisted report
Single-sourceINDONESIA, 24 SEPTEMBER 2026 —
Bank Indonesia (BI) held its benchmark interest rate steady at 5.75% on Wednesday, a decision driven by the imperative to stabilize the Indonesian rupiah against persistent external pressures and heightened global uncertainty.
Market Impact
The central bank maintained this stance following its September 22-23 Board of Governors Meeting, signaling that currency stability remains the primary focus amid tightening monetary conditions in the United States and volatile geopolitical dynamics.
The move shows the delicate balancing act facing emerging market central banks as they navigate a complex global landscape. By keeping rates unchanged, BI aims to preserve the attractiveness of Indonesian assets for foreign investors while simultaneously managing the cost of borrowing for the domestic economy. Deputy Governor Destry Damayanti emphasized that the decision is consistent with the bank’s broader strategy to stabilize the rupiah, keep inflation within target, and support sustainable economic growth.
This approach reflects a cautious stance, prioritizing macroeconomic stability over aggressive stimulus or tightening in a period where external shocks are frequent and unpredictable.
Global uncertainty has intensified in recent weeks, driven by renewed tensions in the Middle East. These geopolitical frictions pushed oil prices to as high as $132 per barrel before they retreated below $100 on September 22. Simultaneously, the US Federal Reserve raised its benchmark rate to 3.75%-4.00% in September, a move that has contributed to higher US Treasury yields.
The resulting rise in yields has weighed on investor appetite for emerging-market assets, creating headwinds for currencies like the rupiah. BI noted that these external pressures necessitate a firm stance on monetary policy to prevent excessive currency depreciation that could import inflation or trigger capital outflows.
In response to these challenges, BI stated it would strengthen foreign exchange interventions and expand incentives to attract foreign investment inflows. The central bank’s active management of the currency is evident in the recent data; the rupiah stood at Rp 17,855 per US dollar on September 22, representing a weakening of 0.78% from the end of August.
To counteract this trend, BI is focusing on measures that support currency stability, including targeted interventions in the foreign exchange market and policies designed to bolster confidence among international investors.
Despite the external headwinds, Indonesia’s domestic economic fundamentals remain resilient. The economy is projected to grow between 4.9% and 5.7% this year, supported by government stimulus packages, improving consumer confidence, and sustained investment activity. The banking sector continues to show expansion, with bank lending growing 13.65% year-on-year in August, up from 13.58% in July.
This growth in credit indicates that the financial system is still effectively channeling funds to the real economy, a key component of BI’s mandate to support sustainable growth.
Inflationary pressures have emerged, however, as prices rose to 3.19% year-on-year in August from 2.88% in July. This increase was driven mainly by higher food prices, specifically chicken, bird's eye chilies, and rice. Despite this uptick, BI expects inflation to remain within its target range of 2.5% plus or minus 1% in both 2026 and 2027.
The central bank’s confidence in maintaining price stability is bolstered by its control over monetary policy and the relative stability of the broader economic environment, allowing it to manage supply-side shocks without compromising the long-term inflation outlook.
The central bank’s foreign exchange reserves provide a substantial buffer against external shocks. Reserves stood at $146.5 billion at the end of August, equivalent to 5.4 months of imports. This level of reserves is considered ample by international standards, providing BI with the capacity to intervene in the foreign exchange market as needed to smooth volatility and maintain rupiah stability.
The strength of these reserves is a critical factor in maintaining investor confidence, as it demonstrates the central bank’s ability to defend the currency against speculative attacks or sudden shifts in global capital flows.
BI’s decision to hold rates reflects a strategic assessment of the current economic environment, where the risks to currency stability outweigh the benefits of rate cuts. By maintaining the benchmark rate at 5.75%, the Deposit Facility rate at 4.75%, and the Lending Facility rate at 6.50%, the central bank is signaling a commitment to price stability and financial system integrity.
As global uncertainties persist, BI will continue to monitor external developments closely, adjusting its policy stance as necessary to ensure that the rupiah remains stable and the economy continues to grow sustainably within the target inflation framework.
Related: Bank Indonesia · Destry Damayanti · Indonesia