{"id":6837,"date":"2026-05-18T05:19:42","date_gmt":"2026-05-18T05:19:42","guid":{"rendered":"https:\/\/himdasun.or.id\/?p=6837"},"modified":"2026-05-18T05:19:46","modified_gmt":"2026-05-18T05:19:46","slug":"rupiah-weakness-opens-door-to-bi-rate-hike-this-week","status":"publish","type":"post","link":"https:\/\/himdasun.or.id\/en\/2026\/05\/18\/rupiah-weakness-opens-door-to-bi-rate-hike-this-week\/","title":{"rendered":"Rupiah Weakness Opens Door to BI Rate Hike This Week"},"content":{"rendered":"

We expect BI to raise policy rate by 25bp.<\/strong><\/a> We now expect BI to raise the BI Rate by 25bp on 20 May to 5.00%, for the following reasons: 1) the persistent weakness of the Rupiah, down more than 2% since BI’s April meeting; 2) the depletion of FX reserves to 5.8 months of imports in April; 3) the persistent increase in SRBI and repo rates, signaling BI’s hawkish bias; and 4) strong loan growth within BI’s target range and solid 1Q GDP growth. We assign a 60% probability to a 25bp BI Rate hike this week, with the remaining 40% reflecting a more patient BI that maintains the dual-track tightening i.e., raising only non-BI Rate instruments to defend the Rupiah.<\/p>\n\n\n\n

Rupiah weakness of more than 2% points to a hike trigger.<\/strong> The historical pattern of the Rupiah suggests that, with depreciation against the Dollar reaching 2.6%, BI will clearly need to hike its policy rate this week. In previous episodes, BI has hiked rates most of the time when the Rupiah weakened by more than 2% (Exhibit 1)<\/strong>. The constitution mandates that the central bank maintain currency stability alongside its other goals of supporting growth and stabilizing prices. Rupiah has also underperformed peers even before the war, with YTD depreciation against the Dollar of 5.5%.<\/p>\n\n\n\n

FX reserves coverage is another trigger for a hike.<\/strong> FX reserves fell by USD10.3bn YTD to USD146.2bn in April, reflecting BI’s intervention to defend the Rupiah. This implies an FX reserve coverage of only 5.8 months of imports, a breach of the 6-month threshold that has historically triggered policy rate hikes (Exhibit 2)<\/strong>. Excluding the FX OMO portion, the import coverage ratio fell to 4.2 months in April. The FX OMO portion has continued to climb to 26% from 15% in May 2020, suggesting lower actual reserves that BI can “freely” deploy for intervention.<\/p>\n\n\n\n

SRBI rate increases help support the Rupiah.<\/strong> On 13 May, the weighted average SRBI rate stayed elevated at 6.4%, implying a 51bp increase since the April BI meeting and 150bp YTD. Despite a stable policy rate, the higher SRBI rates reflect additional support for the Rupiah alongside FX intervention, attracting total net inflows of USD4.6bn YTD. The increase in the 6M SRBI rate to 6.2% has widened the gap to the BI Rate to 146bp, a record high. Just as quietly, BI has lifted the 7d Repo Rate, the cost at which it lends to commercial banks, by 35bp YTD, opening the widest-ever premium gap to the policy rate at 45bp. The wider this gap, the greater the risk that BI loses the credibility of the policy rate as its true anchor, which reinforces our view of an imminent policy rate hike.<\/p>\n\n\n\n

Temporary hike or new trend?<\/strong> A BI Rate hike, if delivered, will likely prove temporary in our view, i.e., lasting only until Rupiah pressures ease. Benign core inflation, together with weak wage growth, points to a loose labor market and reflects sub-optimal economic growth and low-capacity utilization. Excluding gold, core inflation remained low at 1.6% in April versus 1.5% in March. In theory, interest rates should stay low to stimulate private investment and loan demand. As such, we expect BI will not entirely abandon its growth-supportive bias and could ease macroprudential policy to offset the rate tightening.<\/p>\n\n\n\n

Risks to our view.<\/strong> There are several risks to our policy rate hike call which means BI keeping the policy rate unchanged at 4.75%. The main argument against a hike is that it would be seen as going against the spirit of policy synergy that BI has been promoting for some time. Despite higher-than-expected 1Q GDP growth of 5.6%, the MoF’s 2026 target of 5.4% remains high. In addition, loan growth, if SOE bank support for the village cooperative program is excluded, is likely still below BI’s 8 12% target. Since September, the MoF has parked more than IDR200tn in SOE banks to boost lending, while President Prabowo has consistently criticized banks for charging excessive loan rates.<\/p>","protected":false},"excerpt":{"rendered":"

We expect BI to raise policy rate by 25bp. We now expect BI to raise the BI Rate by 25bp on […]<\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[7],"tags":[],"class_list":["post-6837","post","type-post","status-publish","format-standard","hentry","category-market-research"],"_links":{"self":[{"href":"https:\/\/himdasun.or.id\/en\/wp-json\/wp\/v2\/posts\/6837","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/himdasun.or.id\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/himdasun.or.id\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/himdasun.or.id\/en\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/himdasun.or.id\/en\/wp-json\/wp\/v2\/comments?post=6837"}],"version-history":[{"count":1,"href":"https:\/\/himdasun.or.id\/en\/wp-json\/wp\/v2\/posts\/6837\/revisions"}],"predecessor-version":[{"id":6838,"href":"https:\/\/himdasun.or.id\/en\/wp-json\/wp\/v2\/posts\/6837\/revisions\/6838"}],"wp:attachment":[{"href":"https:\/\/himdasun.or.id\/en\/wp-json\/wp\/v2\/media?parent=6837"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/himdasun.or.id\/en\/wp-json\/wp\/v2\/categories?post=6837"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/himdasun.or.id\/en\/wp-json\/wp\/v2\/tags?post=6837"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}