Indonesia Prioritizes Rupiah Stability Amid Global Market Volatility

RRI.CO.ID, Jakarta - The Indonesian government has made stabilizing the rupiah’s exchange rate a top priority amid pressure from global financial markets, with coordinated monetary and fiscal policies seen as key to mitigating volatility.

Bank Indonesia (BI) is once again in the spotlight after raising its benchmark interest rate (BI Rate). Fixed Income Analyst at PT Mirae Asset Sekuritas Indonesia, Jessica Tasijawa, said there is still room for further monetary tightening if pressure on the rupiah intensifies.

“This interest rate hike is primarily aimed at supporting the rupiah’s appreciation and maintaining external stability. After briefly breaching the psychological level of IDR 18,000 per USD, the rupiah began to recover and strengthened to around IDR 17,730 per USD on a month-to-date basis,” Jessica said in Jakarta on Friday, June 19, 2026, as quoted by Antara.

The 25-basis-point increase in the BI Rate to 5.75 percent marks the third consecutive tightening in the past two months, reflecting the central bank’s aggressive response to global uncertainty.

On the inflation front, price pressures are beginning to rise and warrant close monitoring. The Wholesale Price Index (WPI) climbed to 5.76 percent year-on-year in May 2026, while core inflation excluding gold rose to 1.63 percent from 1.36 percent the previous month.

Movements in the bond market have further strengthened the appeal of domestic financial assets. The yield on 10-year Government Securities (SBN) has risen by 92 basis points since the start of the year to 7 percent, while the 2-year yield has reached 7.08 percent, helping attract foreign capital inflows.

In addition to interest rate hikes, BI has expanded its rupiah stabilization toolkit by offering incentives to reduce swap hedging costs for foreign investors and by reopening repurchase auctions across various tenors. These measures aim to maintain liquidity balance while preserving the attractiveness of domestic assets.

Jessica noted that the decline in foreign exchange reserves since the start of the year underscores the importance of interest rates as a tool for maintaining external stability. “Therefore, BI still has room to raise interest rates again should pressure on the rupiah resurface,” she said.

Looking ahead, the rupiah’s trajectory, global central bank policies, and domestic inflation will remain the market’s primary focus. The government and monetary authorities are expected to maintain tight monetary policy as long as external risks remain elevated. ***