Bank Indonesia Holds BI-Rate at 5.75% for a Second Straight Month Amid Middle East-Linked Volatility

Bank Indonesia's Board of Governors held its benchmark BI-Rate at 5.75% at its monthly policy meeting on August 18-19, 2026, marking a second consecutive hold following a rate-hiking cycle earlier in the year. The deposit facility rate remained at 4.75% and the lending facility rate at 6.50%. It was also the first policy meeting led by Acting Governor Destry Damayanti since she took over the role.

Acting Governor Destry Damayanti said the decision is aimed at strengthening the rupiah's stability amid high global volatility tied to the Middle East conflict, while keeping inflation within Indonesia's 2026-2027 target range of 2.5% plus or minus 1 percentage point. Indonesia's headline inflation ran at 2.88% year-on-year in July, inside that band.

A Second Straight Hold After a Year of Tightening

Bank Indonesia's Board of Governors met on August 18 and 19, 2026, and voted to leave the BI-Rate unchanged at 5.75%, the second consecutive month the rate has held at that level. The pause follows a rate-hiking cycle earlier in 2026, during which the central bank raised its benchmark rate several times to defend the rupiah and rein in inflation. The deposit facility rate held at 4.75% and the lending facility rate at 6.50%, keeping the full policy corridor unchanged from July. It was also the first meeting chaired by Acting Governor Destry Damayanti since she assumed the role, making this as much a leadership-transition story as a policy-continuity one.

Rupiah Stability the Central Focus

Acting Governor Destry Damayanti, who led the August press conference, said the decision remains consistent with Bank Indonesia's efforts to strengthen rupiah exchange-rate stability against a backdrop of elevated global volatility stemming from the conflict in the Middle East. She said the current rate level is intended to keep inflation within Indonesia's 2026-2027 target of 2.5%, with a tolerance band of plus or minus 1 percentage point, while continuing to support sustainable economic growth. Indonesia's headline consumer price inflation ran at 2.88% year-on-year in July, comfortably inside that target range, giving the central bank room to hold rather than tighten further.

Beyond the Policy Rate

Damayanti said Bank Indonesia will continue expanding incentive policies designed to draw foreign capital inflows and reinforce the rupiah, alongside steps to increase liquidity and reduce liquidity segmentation across the money and banking markets. The central bank also plans to accelerate the deepening of Indonesia's money market and foreign-exchange market. Separately, Bank Indonesia said its macroprudential and payment-system policies remain oriented toward supporting economic growth, rather than being used as tightening tools in this cycle.

Why the Pause Matters

The hold caps a year in which Bank Indonesia raised rates multiple times to shore up the rupiah against broader emerging-market currency pressure, before pausing in July and again in August. Holding for a second straight month — and doing so at the new Acting Governor's first meeting — signals continuity: Damayanti's remarks focused on reinforcing the current stance and stability measures rather than giving forward guidance on where rates go next.

Reader Q&A

Why did Bank Indonesia hold rates instead of cutting or raising them further?

Indonesia's July inflation, at 2.88% year-on-year, sat comfortably within the central bank's 2026-2027 target range of 2.5% plus or minus 1 percentage point, giving Bank Indonesia room to hold rather than tighten further after raising rates by a cumulative 100 basis points earlier in 2026.

What's the difference between the BI-Rate, the deposit facility rate, and the lending facility rate?

The BI-Rate (5.75%) is Bank Indonesia's main benchmark policy rate. The deposit facility rate (4.75%) is what banks earn for parking excess funds overnight with the central bank, and the lending facility rate (6.50%) is what banks pay to borrow overnight from it — together the three form the policy corridor Bank Indonesia uses to guide short-term market rates.

How is the Middle East conflict connected to Indonesian monetary policy?

Bank Indonesia cited elevated global volatility linked to the Middle East conflict as a factor pressuring the rupiah and other emerging-market currencies; holding rates steady is part of its effort to keep the rupiah stable against that external backdrop.

Is Bank Indonesia done raising rates for this cycle?

The bank's statement did not signal an end to the tightening cycle — Acting Governor Destry Damayanti's remarks focused on stability and support measures for this meeting rather than giving forward guidance on future rate moves.

What other tools is Bank Indonesia using besides the interest rate?

The central bank said it will keep expanding incentive policies to attract foreign capital inflows, increase liquidity and reduce liquidity segmentation in money and banking markets, and accelerate the deepening of Indonesia's money and foreign-exchange markets, alongside macroprudential and payment-system policies aimed at supporting growth.