Bank Indonesia Another hike to cement recent policy pivot

Research evidence excerpt

Bank Indonesia Another hike to cement recent policy pivot

18 June 2026

Bank Indonesia Economics

Another hike to cement recent policy pivot Indonesia

◆ BI hiked policy rate by 25bp to 5.75% to defend the IDR and pre-empt inflation Pranjul Bhandari

risks ChiefEconomist/Strategist,India ASEAN

Economist

◆ Including today’s action, BI has delivered 100bp in rate hikes in a month, TheBankingHongkongCorporationand ShanghaiLimited,

cementing its recent pivot towards more orthodox monetary policy Singaporepranjul.bhandari@hsbc.com.sgBranch

+65 6658 4976

◆ Even as oil prices cool, the disruptive impact of the El Nino could begin to Aayushi Chaudhary

show up over the next few months; we expect another 25bp rate hike in 3Q26 Economist, India, Indonesia & Sri Lanka

HSBC Securities and Capital

Markets (India) Private Limited

Bank Indonesia raised the policy rate by 25bp to 5.75% at its June policy meeting, marking a total of aayushi.chaudhary@hsbc.co.in

100bp in rate increase in one month. 25 of 40 forecasters on Bloomberg, including us, had expected +91 22 2268 5543

today’s rate increase. Priya Mehrishi

Associate Economist

Another one for the IDR. Indonesia has run a BoP deficit for a second year in a row, which explains Markets (India) Private Limited

some of its FX weakness. But the 11% IDR depreciation against the USD since early 2025 has not priya.mehrishi@hsbc.co.in

+91 97391 69567

incentivised substantial ‘expenditure switching’ (i.e. more exports, lower imports), and cannot be relied on

to close the BoP deficit. Instead, ‘expenditure compression’, which slows excesses in growth, inflation and

the twin deficits, have become the much-needed bitter pill, resulting in rate increases.

Today’s hike cements BI’s recent policy pivot. Since early June, BI has done a pivot towards