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Indonesia's Central Bank Holds Rates, Eyes Currency
22 Jan
Summary
- Bank Indonesia kept its benchmark rate at 4.75% for the fourth consecutive month.
- Governor Warjiyo vowed large-scale interventions to stabilize the rupiah.
- Central bank assures markets its governance remains strong and professional.
Bank Indonesia held its benchmark interest rate steady at 4.75% for a fourth consecutive month, with Governor Perry Warjiyo emphasizing a primary focus on currency stability. He assured markets that the central bank is prepared to undertake large-scale interventions to stabilize and strengthen the rupiah.
Warjiyo addressed investor concerns regarding the nomination of President Prabowo Subianto's nephew as a deputy governor, asserting that Bank Indonesia's governance and policy-making processes remain strong and professional. He stated that this nomination would not impede the central bank's duties or authority as mandated by law.
While the central bank continues to seek opportunities for lowering borrowing costs, the timing is contingent on the rupiah's performance. Factors such as market perceptions of Indonesia's fiscal condition, US Treasury yields, and domestic demand have pressured the currency. The rupiah has experienced a significant decline this year, making it Asia's second-worst-performing currency.
Earlier on January 22, 2026, Governor Warjiyo met with the Finance Minister to discuss fiscal and monetary coordination for economic improvement. Bank Indonesia forecasts economic growth between 4.9% and 5.7% for the year, below the finance minister's target of 6%. Economists anticipate further rate cuts but suggest they will be gradual, dependent on both the Federal Reserve's actions and the stability of the rupiah.
