Indonesia's Central Bank Holds as Rupiah Stays in Focus—Update

By Ying Xian Wong

Indonesia's central bank left interest rates unchanged for a fourth straight meeting on Thursday, a widely expected move as rupiah stability remained in focus.

Bank Indonesia kept its benchmark seven-day reverse repo rate at 4.75%, extending a pause that began after its last rate cut in September. Only one of eight economists surveyed by The Wall Street Journal had expected a cut at the bank's first meeting of 2026; the others forecast no change.

The decision came amid currency and market volatility.

The rupiah has fallen to record lows against the dollar in recent months, prompting policymakers to pledge continued intervention to stabilize the currency.

Gov. Perry Warjiyo said the was consistent with the bank's goals of stabilizing the rupiah, keeping inflation within its target range and supporting economic growth.

The central bank also left its overnight deposit facility rate at 3.75% and its lending facility rate at 5.50%.

Bank Indonesia said it will keep working to ensure earlier rate cuts and other policy measures feed through to the economy. It will also assess room for further rate reductions, in line with its 2026-2027 inflation forecast of 1.5%-3.5%, while supporting growth.

The bank expects economic growth to strengthen in the first quarter of 2026, helped by stronger household spending amid government stimulus, major religious festivals and a pickup in investment, supported by public spending and improved business confidence.

Bank Indonesia said the rupiah is undervalued relative to economic fundamentals and that it has stepped up currency intervention. It expects the exchange rate to stabilize and gradually strengthen, supported by continued those measures and solid fundamentals.

Thursday's policy meeting also marked the first attended by President Prabowo's nephew, Thomas Djiwandono, as BI deputy governor. "The decision to hold will be taken by some as a sign that the central bank's independence is safe, although we would caution that it is still early days," said Jason Tuvey of Capital Economics.

Further rate cuts are likely to come in tandem with changes to the Federal Funds Rate expected in the second quarter, RHB economist Wong Xian Yong said. He pointed to growth, inflation and movements in the rupiah in determining the near-term policy path.

RHB expects Bank Indonesia to deliver two 25-basis-point cuts in 2026, bringing the policy rate to 4.25%.

Write to Ying Xian Wong at yingxian.wong@wsj.com

(END) Dow Jones Newswires

February 19, 2026 04:39 ET (09:39 GMT)