Bank Indonesia said on Tuesday it had increased its policy interest rate by 25 basis points, bringing the benchmark to 5.50% after an emergency meeting. The central bank framed the move as a response to renewed downward pressure on the rupiah in recent days.
The emergency decision arrived a little more than a week before the central bank’s next planned policy session on June 17. Bank Indonesia had already delivered a larger adjustment at its May meeting, raising rates by 50 basis points.
Officials described the purpose of the unscheduled hike as support for the rupiah, which had experienced notable weakness before the decision. Prior to Tuesday’s action, the currency had weakened by more than 8% against the U.S. dollar on a year-to-date basis, a performance that placed it among the weakest in the region.
The timing of the increase - outside the regular meeting calendar - underscores the central bank’s concern about recent market moves and the rupiah’s slide. Bank Indonesia’s statement tied the emergency step directly to the need to address that recent pressure.
For context, the May meeting had already seen policy tightened by 50 basis points. The latest 25 basis-point increase raises the policy rate to 5.50% and was explicitly described by officials as an action intended to buttress the domestic currency.
Bank Indonesia announced the decision on Tuesday and emphasized its aim of supporting the rupiah. Prior to the move the currency’s year-to-date decline exceeded 8%, a decline against the dollar that left it among Asia’s worst performing currencies.
Summary
Bank Indonesia held an emergency session on Tuesday and raised the policy rate by 25 basis points to 5.50% with the stated goal of alleviating pressure on the rupiah. The decision precedes a scheduled meeting on June 17 and follows a 50-basis-point hike at the May policy meeting. Before the emergency move, the rupiah had fallen more than 8% against the dollar year-to-date.