Bank Indonesia holds main rate at 5.75%, cuts bank reserve ratio
The central bank will reduce commercial bank reserve requirements by two percentage points over November and December, aiming to stabilise the rupiah and support growth.
Bank Indonesia Holds Key Rate
Bank Indonesia (BI) maintained its benchmark BI-Rate at 5.75 per cent on Wednesday, 21 October 2026. This decision aligns with the expectations of half the economists surveyed by Bloomberg. Alongside the rate hold, the central bank announced a cut to the reserve requirement ratio (RRR) for commercial banks.
This measure, which dictates the capital banks must hold, will decrease by one percentage point in November and another in December, potentially freeing up liquidity for lending. BI also increased its deposit facility rate.
Stabilising the Rupiah and Growth
BI Governor Destry Damayanti stated the rate hold supports rupiah stability amid ongoing external pressures. The strategy also aims to promote economic growth and achieve an inflation target of 1.5 to 3.5 per cent. The central bank has kept rates steady since July 2026, following a total of 100 basis points (bps) in increases earlier this year.
This cautious approach seeks to avoid premature tightening that could hinder growth in Southeast Asia's largest economy.
Market Reaction Amid External Pressure
Following the announcement, the rupiah depreciated slightly to 17,998 per US dollar. Indonesia's 10-year government bond yield remained stable at 7.45 per cent, while the benchmark stock index recovered earlier losses to finish largely unchanged. Governor Damayanti noted a "subdued" global economic outlook, citing high oil prices, persistent inflation, and weak growth.
These factors, combined with anticipated US monetary policy tightening and foreign investor sentiment, have pressured the rupiah, which had previously weakened past 18,000 per US dollar.
Bank Indonesia has prioritised targeted interventions, such as foreign exchange measures and hedging incentives, over broader rate increases to manage currency volatility. Governor Damayanti believes significant rate hikes could unduly weigh on domestic demand. However, the central bank acknowledged that sustained capital outflows could intensify pressure on the rupiah.
Should these outflows continue, the argument for a future rate increase would strengthen, potentially impacting lending costs for businesses and investment decisions in the coming months.
This article is journalism, not investment advice; consult a licensed professional before making financial decisions. Market data is indicative, may be delayed, and should be verified with your broker or exchange before use.
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