Bank Indonesia lifted the benchmark BI-Rate by 25 basis points to 5.5%, it said in a statement on Tuesday, ahead of the scheduled June 17-18 policy review. The central bank had raised the key rate by a larger-than-expected 50 basis points in May.
“Bank Indonesia sees the need to take further steps to strengthen the stabilisation of the rupiah exchange rate by raising yields and offering various incentives to encourage foreign inflows,” the central bank said in a statement.
“The stabilisation of the rupiah exchange rate is also intended to maintain the external resilience of the Indonesian economy and ensure that the inflation targets for 2026 and 2027 are met,” it added.
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The rupiah extended gains to 0.2% after the decision, while the yield on five-year government bonds held its increase of 13 basis points. Stocks rallied 4.8% before heading into the noon break.
The emergency action reflects escalating concerns among policymakers after the rupiah’s slump drained foreign exchange reserves, which fell for the fifth consecutive month in May, the longest losing streak since 2018.
The move comes a day after Indonesia’s 10-year government bond yield jumped to the highest in more than a year, underscoring pressure on local assets as investors reassess exposure to emerging markets.
The rupiah has weakened about 8% this year, while foreign investors have pulled more than $3.5 billion from Indonesian stocks, as the benchmark equity index tumbled more than 30%. Bank Indonesia and the government had recently pledged to join forces to boost the appeal of Indonesian assets to attract portfolio inflows.
It is the second off-cycle rate increase under Warjiyo since he took the reins at Bank Indonesia about eight years ago. In May 2018, the central bank raised the benchmark rate by 25 basis points to counter an emerging-market selloff triggered by rising US interest rates.
