Bank Indonesia opted to keep its policy rate at 4.75% on Wednesday, citing a principal objective of facilitating a firmer rupiah, the Bank of America research note said. While the central bank left the policy rate unchanged, it did not preclude future tightening if circumstances require and reiterated its readiness to intervene to preserve currency and price stability.
The central bank said it would maintain accommodative macroprudential settings to continue supporting stronger credit expansion and broader economic growth. In its communication, Bank Indonesia framed its policy stance as balancing the goals of exchange-rate stability with the need to foster household and business lending.
Bank of America analysts expect the policy rate to remain on hold for an extended period. Rather than raising the policy rate outright, the analysts anticipate Bank Indonesia could tighten monetary conditions by nudging SRBI yields higher. At present, 12-month SRBI yields sit at about 90 basis points above the policy rate, according to the note.
In explaining its decision, Bank Indonesia pointed to FX considerations, noting concern about USD-IDR trading slightly above the 17,000 level. The central bank judged the rupiah to be undervalued relative to its fundamentals and said it would step up intervention in offshore non-deliverable forwards as part of efforts to support the currency.
As part of those measures, Bank Indonesia said it would permit some primary dealers to sell in offshore NDFs, aiming to narrow pricing discrepancies between offshore NDFs and onshore foreign exchange markets. This initiative supplements FX management steps announced in March, which coincided with an increase in the share of spot transactions supported by valid underlying documentation - from 89.2% to 93.5%.
The central bank also revised its outlook for the current account deficit in 2026, lowering the forecast by 40 basis points to a range of 0.5-1.3% of GDP. Bank Indonesia emphasized it is prepared to tighten monetary policy further if necessary to keep both the exchange rate and inflation on target.
On credit growth, Bank Indonesia set an objective to lift loan expansion into the upper half of its 8-12% target range for 2026. For context, loan growth stood at 9.5% year-over-year in March, indicating the central bank seeks an acceleration in lending activity as part of its broader economic goals.