First Read: APAC Economic Comment "BI: 50bp rate hike amidst IDR weakness" Lim

Research evidence excerpt

First Read: APAC Economic Comment "BI: 50bp rate hike amidst IDR weakness" Lim

Global Research

20 May 2026ab

First Read

EconomicsAPAC Economic Comment

BI: 50bp rate hike amidst IDR weakness Indonesia

Grace Lim

Economist

grace-k.lim@ubs.com

BI raised the BI-Rate by 50bp to 5.25%

+65-6495 5965

BI’s surprise 50bp hike, despite manageable inflation, underscores its clear policy priority

Rohit Aroraof safeguarding financial stability, particularly FX stability, even at the cost of near-term

Strategist

growth. This is consistent with past episodes (e.g. 2022, 2018, 2013). In hindsight, the

rohit-b.arora@ubs.com

move is less surprising given the rupiah's year-to-date depreciation. We had expected BI +65-6495 5232

to proceed more gradually amid elevated uncertainty, particularly around the Middle

Claire LongEast. However, rising market volatility and increasing policy uncertainty have accelerated

the need for action. Taking today’s move into account, alongside our FX Strategists’ claire.long@ubs.com

expectation of continued upside pressure on USD/IDR (link), we now expect two +65 6495 7426

additional 25bp hikes in June and August. Depreciation pressures on the rupiah

continue to reflect a mix of policy uncertainty (including today's announcement that the

government plans to centralize commodity exports, raising concerns over rising state

intervention), growth and fiscal concerns, and volatile capital flows. Accordingly, we

revise our end-2026 USD/IDR forecast to 17,800 (from 17,200), with further near-term

weakness likely.

Key messages from BI’s analyst briefing

BI indicated that policy will remain data-dependent while guided by forward-looking

assessments. However, the hierarchy of objectives is clear: maintaining financial stability

remains the central priority.