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Bank Indonesia holds BI Rate at 5.75% and leans on capital-flow incentives
Commerzbank notes USD/IDR has pulled back from above 18,200 to around 17,900, but it says another 25 bp hike later this year remains possible if rupiah pressure returns.
Bank Indonesia kept the BI Rate unchanged at 5.75%, according to Commerzbank analysis cited by FXStreet, opting for targeted capital-flow incentives rather than further tightening to support the Indonesian rupiah.
Commerzbank’s Charlie Lay said BI cut hedging costs and improved macroprudential liquidity tools, and that the approach resembles the Reserve Bank of India’s strategy of using capital-flow measures to back a currency rather than relying only on higher policy rates.
The analysis points to rupiah weakness tied to higher oil prices plus concerns about fiscal discipline and policy credibility. It also notes the board weighed another rate hike against the potential hit to domestic borrowing costs and consumption, especially after BI already raised rates by 100 basis points in two months.
While Commerzbank said the recent pullback in USD/IDR from above 18,200 to around 17,900 gives BI some breathing room, it warned the rupiah remains vulnerable. Lay added that renewed depreciation pressures could still lead BI to consider another 25 bp hike later this year, with risks including higher oil prices, safe-haven USD demand, and ongoing fiscal-management concerns.