Bank Indonesia (BI) kept its benchmark at 5.75% while easing reserve rules and raising a deposit rate, a mixed policy move as external pressures continued to weigh on the rupiah.
At its Oct. 20-21 meeting, BI left the BI-Rate at 5.75%. The Deposit Facility rate rose 25 basis points to 5.00%; it had stood at 4.75% in September. BI kept the Lending Facility rate at 6.50%. Reuters found that 15 of 29 economists in its poll expected the benchmark to stay put; EconoTimes previewed the divided expectations ahead of the meeting.
Reserve requirements are also set to ease. The average for conventional commercial banks will move from 9% to 7%, while the rate for sharia commercial banks and sharia business units will go from 7.5% to 5.5%. Each reduction takes effect in one-percentage-point steps on Nov. 1 and Dec. 1. BI said the changes are intended to strengthen rupiah liquidity and support lending.
BI raised the premium reduction for domestic non-deliverable forward hedges to 40% for six-month tenors and 45% for 12-month tenors. The corresponding rates had been 25% and 30%. BI said its policy incentives drew $9.9 billion in foreign capital from their June 2026 launch through Oct. 20.
Portfolio flows varied by quarter. BI recorded $80 million in net foreign portfolio outflows in the third quarter, mostly from equities. It said equity outflows continued in October, while purchases of BI Rupiah Securities and government securities helped bring portfolio investment to $660 million in net inflows for the fourth quarter through Oct. 19.
BI said the rupiah had fallen 0.61% against the dollar from the end of September through Oct. 20. It cited Middle East tensions, tighter U.S. monetary policy and foreign investor sentiment toward Indonesian equities. The Jakarta Interbank Spot Dollar Rate (JISDOR), BI’s daily reference, was Rp18,047 per U.S. dollar on Oct. 22.
FXStreet reported that Commerzbank analysts Charlie Lay and Dr. Henry Hao saw the rupiah’s outlook as challenging despite BI’s efforts to attract foreign capital. MSCI opened a consultation Oct. 15 on a proposal to shift Indonesia from Emerging Market to Standalone Market status. The index provider cited market participants’ concerns about opaque shareholding and suspected coordinated trading. Comments are due by April 30, 2027, with a decision expected by June 30, 2027. BI’s next scheduled policy meeting is Nov. 17-18.
