Bank Indonesia Surprises With Rate Hike to Stem Rupiah Bleeding

By Ying Xian Wong

Indonesia's central bank hiked rates in an off-schedule decision on Tuesday, coming as a complex mix of headwinds hammer the country's currency.

Policymakers raised the benchmark rate by 25 basis points to 5.50% and announced measures to help steady the rupiah, including incentives to encourage foreign investment.

They also hiked the overnight deposit facility rate and lending facility rate by 25 basis points each to 4.50% and 6.25% respectively.

The moves are part of efforts to stabilize the rupiah amid heightened global volatility stemming from the Middle East conflict, and ensure that inflation stays on target, Ramdan Denny Prakoso of the BI's communication department said in a statement.

The rupiah strengthened after Bank Indonesia's announcement, while the local benchmark index held on to gains.

Indonesian assets have experienced a sharp selloff recently, driven by a loss of investor confidence and concerns about domestic policymaking and external uncertainty.

The rupiah has been bleeding, and the central bank has no choice but to hike and defend the currency, said Zerlina Zeng at CreditSights.

But like other analysts, she has some reservations about how effective a rate increase will be.

"The market is worried about lots of other macro issues: fiscal sustainability, governance, growth, fuel costs, tighter banking sector liquidity, and systemic vulnerability to foreign capital outflows," Zeng said.

--Fabiana Negrin Ochoa contributed to this report

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

(END) Dow Jones Newswires

June 09, 2026 02:32 ET (06:32 GMT)