Indonesian Rupiah: BI prioritizes IDR stability – Commerzbank

Commerzbank’s Henry Hao and Moses Lim report that Bank Indonesia kept the BI Rate at 5.75% while expanding FX hedging incentives to support the Indonesian Rupiah. Governor Destry Damayanti signaled a preference for non-rate tools and incentive-based measures over SRBI yield hikes. The bank maintains its 2026 GDP and inflation forecasts, and Commerzbank expects BI to stay on hold unless IDR weakness or inflation pressures re‑emerge.

Incentives over rate hikes

"Bank Indonesia (BI) kept the BI Rate unchanged at 5.75% for a third consecutive meeting, in line with expectations. The decision reflects BI's need to balance rising inflation risks and IDR stability against supporting growth. Newly appointed BI Governor Destry Damayanti said the "current policy interest rate is adequate to maintain stability" and expects the IDR to remain supported by economic fundamentals."

"BI adopted a more neutral tone at this meeting. Governor Damayanti said the domestic economy "needs a boost" and that BI is "exploring policies beyond interest rates to address global uncertainties". This suggests BI will remain on hold as long as IDR depreciation pressures remain contained."

"To support portfolio inflows, BI increased the premium discount on conventional hedging swaps from a flat 12.5% for all tenors to 15% for the 3-month tenor, 20% for 6-months, and 25% for 12-months."

"Looking ahead, IDR stability is likely to remain BI's primary policy consideration. We expect BI to keep the BI Rate unchanged at 5.75% for the rest of the year. The current BI Rate, alongside inflow measures, should provide sufficient room to support growth while containing inflation and FX risks."

"However, renewed IDR depreciation pressures or a more persistent rise in inflation could justify further tightening."