Bank Indonesia holds BI-Rate at 5.75% at August policy meeting

Jakarta — Bank Indonesia has maintained its benchmark BI-Rate at 5.75% following its Board of Governors Meeting on 18–19 August 2026, keeping the Deposit Facility at 4.75% and the Lending Facility at 6.50% according to the central bank’s policy statement and subsequent summaries. The decision is framed as supporting rupiah exchange-rate stability, keeping inflation within the 2.5% ± 1 percentage point target range for 2026–2027, and underpinning sustainable economic growth amid heightened global volatility.

In its 19 August press release, the central bank cited ongoing geopolitical conflict in the Middle East, renewed pressure on global oil and commodity prices, expectations of tighter US monetary policy and elevated US Treasury yields as key sources of global financial uncertainty. Bank Indonesia noted that these conditions have maintained a strong US dollar and weighed on investor appetite for emerging-market assets.

Bank Indonesia expects global economic growth in 2026 to remain subdued at around 3.0%, with global inflation projected near 4.5%, reflecting lingering price pressures despite monetary tightening in advanced economies. The bank argues that these dynamics justify a cautious stance focused on currency and inflation stability rather than aggressive changes to domestic borrowing costs.

Why the rate was kept unchanged

The central bank’s policy communication emphasises exchange-rate stability and inflation control as the primary objectives behind holding the BI-Rate at 5.75%. Bank Indonesia reiterated that consumer-price inflation should be kept within the 2.5% ± 1 percentage point corridor during 2026 and 2027, underscoring its medium-term inflation-targeting framework.

At the same time, the decision reflects the need to preserve economic momentum. Indonesia’s economy expanded 5.29% year on year in the second quarter of 2026, moderating from 5.61% in the first quarter, according to official data released by Statistics Indonesia and summarised by independent economic analysts. Bank Indonesia described growth as resilient but acknowledged that it must be supported in the face of global headwinds.

Rather than relying solely on the BI-Rate, the central bank signalled a mix of monetary, macroprudential and payment-system measures to manage liquidity and market conditions. These include foreign-exchange intervention to smooth rupiah volatility, management of money-market rates, and efforts to ensure ample liquidity in the banking system.

Bank Indonesia reported that it is maintaining double-digit primary-money growth above 10%, consistent with ongoing monetary expansion, while working to improve liquidity distribution and deepen domestic money and foreign-exchange markets. The combination of interest-rate policy and these operational tools is intended to safeguard financial stability without derailing growth.

Key policy parameters:

• BI-Rate: 5.75%
• Deposit Facility: 4.75%
• Lending Facility: 6.50%
• Inflation target: 2.5% ± 1 percentage point for 2026 and 2027

Relevance for Bali businesses and projects

For property developers, hotel operators and other businesses in Bali, the decision to keep the BI-Rate unchanged provides continuity in Indonesia’s benchmark monetary stance, but it does not directly fix the lending rates offered by commercial banks. Actual borrowing costs will depend on individual bank pricing strategies, liquidity conditions and project-specific risk assessments, which are not detailed in the central bank’s August communication.

The announcement is nevertheless significant for projects relying on rupiah funding or foreign capital. Bank Indonesia stated that it will expand eligibility for a 12.5% premium-reduction incentivesecond week of September 2026 for foreign loans and foreign direct investment entering Indonesia from 1 July 2026, with hedging transactions allowed for up to 12 months and a maximum contract period of three years, which can be rolled over in line with remaining maturities.

Bank Indonesia also outlined plans for a macroprudential liquidity incentive aimed at money-market deepening and priority-sector financing from 1 September 2026, alongside an inclusive macroprudential financing-ratio policy set to start on 1 October 2026 to encourage lending to inclusive and sustainable sectors. These instruments could influence the availability and pricing of credit for Bali-based enterprises, particularly those aligned with targeted sectors, even though the central bank did not break down expected impacts by region or industry.

For tourism and property businesses in Bali, the combination of a stable benchmark rate, continued monetary expansion and targeted macroprudential incentives suggests a policy environment that seeks to balance financial stability with support for investment. However, project-level borrowing rates and demand indicators such as hotel occupancy or property prices will continue to be driven by commercial-bank policies and market conditions beyond the scope of the August decision.

Sources

• Bank Indonesia – BI-Rate Held at 5.75%: Strengthening Stability, Supporting Economic Growth (news release)
• Tempo.co – Why Bank Indonesia Held Its BI Rate at 5.75 Percent
• RRI.co.id – BI Holds Benchmark Rate at 5.75 Percent Amid Rupiah Pressure, Global Uncertainty
• AHK Indonesia – Bank Indonesia Keeps BI Rate at 5.75% in August 2026 amid Global Volatility
• Indonesia Investments – Indonesia GDP Growth Beats Forecasts at 5.29% in Q2-2026
• Trading Economics – Indonesia Q2 GDP Annual Growth Beats Forecasts