TEMPO.CO, Jakarta - The think tank institution under PermataBank, Permata Institute for Economic Research (PIER), stated that Bank Indonesia (BI) may raise the benchmark interest rate, also known as the BI rate, to 5 percent if the rupiah continues to weaken. On Tuesday morning, May 12, 2026, the rupiah briefly reached a record low of over 17,500 to the U.S. dollar.
Head of Macroeconomics and Market Research at Permata Bank, Faisal Rachman, stated that the BI's benchmark interest rate has the potential to increase from 4.75 percent. "In 2026, there is a possibility of an increase in the BI rate. So, our projection suggests a likely increase of 25 basis points," he said during the Virtual Media Briefing of the PIER Economic Review on Tuesday, May 12, 2026.
Faisal stated that PIER has revised its previous projection. The increase in the benchmark interest rate to 5 percent is expected to occur in the first half of 2026. "So perhaps in May or June," he said.
A BI rate increase may be necessary due to the rupiah's weakening exchange rate. To date, its depreciation has exceeded 4 percent. According to Faisal, historically, when the rupiah weakens by more than three percent, the central bank has the option to raise the interest rate.
PIER presented three main factors that influence this decision: the risk of increasing inflation, the risk of a widening current account deficit, and the movement of the Federal Reserve's benchmark interest rate, also known as the Fed Funds Rate. Although there are signs of improvement, there is limited room for maneuvering this year.
Previously, Bank Indonesia Governor Perry Warjiyo had mentioned that the room for cutting the benchmark interest rate or BI Rate in the future will become increasingly restricted. Perry stated that BI needs to recalibrate various policies towards stability.
"Although we maintain our BI Rate at 4.75 percent, evidently, in the future, the possibility for a decrease is likely to become even more limited, and we also have to address it for stability," said Perry during a working meeting with the Commission XI of the People's Representative Council in Jakarta on Wednesday, April 8, 2026.
Anastasya Lavenia contributed to the writing of this article
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