Bank Indonesia Keeps Interest Rates Unchanged, Rupiah Exchange Rate Remains Policy Focus

　　Bank Indonesia on Thursday kept interest rates unchanged for the fourth consecutive meeting, a result that was in line with broad market expectations, as the current policy focus remains on stabilizing the rupiah.

　　Bank Indonesia maintained the 7-day reverse repurchase benchmark rate at 4.75%, continuing a wait-and-see stance since the last rate cut in September of last year.

　　This decision was made against the backdrop of fluctuations in exchange rates and the market.

　　In recent months, the rupiah has fallen to historic lows against the US dollar, prompting policymakers to pledge continued intervention in the foreign exchange market to stabilize the currency.

　　The governor of Bank Indonesia stated that this decision aligns with the central bank's goals of stabilizing the rupiah, keeping inflation within the target range, and supporting economic growth.

　　The central bank also kept the overnight deposit facility rate at 3.75% and the lending facility rate at 5.50%.

　　Bank Indonesia stated that it will continue to promote the transmission of previous rate cuts and other policy measures to the real economy, and will assess the scope for further rate cuts based on inflation expectations of 1.5%–3.5% for 2026–2027, while continuing to support economic growth.

　　The bank expects that, driven by government stimulus measures, stronger household consumption during major religious holidays, and a rebound in investment supported by improved public spending and business confidence, economic growth in the first quarter of 2026 will strengthen.

　　Bank Indonesia noted that the rupiah is undervalued relative to economic fundamentals and has stepped up intervention in the foreign exchange market. It is expected that with the continued implementation of related measures and underlying fundamentals remaining sound, the exchange rate will tend to stabilize and gradually strengthen.

　　Thursday's policy meeting was also the first attended by Thomas Djiwandono, the nephew of Indonesian President Prabowo, in his capacity as Deputy Governor of Bank Indonesia. Jason Tuvey of Capital Economics commented, "Some may view this pause as a signal of the central bank's independence being preserved, but we remind that it is still too early to draw conclusions."

　　An economist at Malaysia's RHB Bank stated that further rate cuts by Bank Indonesia are likely to take place in sync with the market's expectations for the Federal Reserve to adjust the federal funds rate in the second quarter. He pointed out that the near-term policy path will depend on economic growth, inflation, and the performance of the rupiah.

Editor: He Yun