Bank Indonesia Holds Steady on Interest Rates, Signals Potential for Future Cuts

Bank Indonesia (BI) maintained its benchmark interest rate at 4.75% on Thursday, February 19, 2026, a decision aligned with expectations to bolster rupiah stability whereas supporting inflation control and economic growth . The Deposit Facility rate remains at 3.75% and the Lending Facility rate at 5.5%.

Rupiah Stability and Economic Growth as Priorities

Governor Perry Warjiyo emphasized that the decision reflects BI’s commitment to reinforcing exchange rate stability amidst ongoing global economic uncertainties, while ensuring inflation stays within the target range and fostering economic growth . The central bank indicated that conditions remain open for further rate reductions, anticipating inflation to stay within the 2.5±1% target range in 2026-2027.

Addressing Rupiah Weakness and Boosting Credit Expansion

The decision comes as the rupiah has weakened by 1.13% year-to-date, reaching 16,880 against the US dollar as of February 19, 2026 . Governor Warjiyo noted the rupiah is currently undervalued considering Indonesia’s economic fundamentals and controlled inflation.

To stabilize the exchange rate, BI will increase intervention through deliverable forward (NDF) transactions in the offshore market, spot transactions, and domestic non-deliverable forward (DNDF) transactions . BI plans to deepen the rupiah-yuan foreign exchange market alongside increasing trade transactions with China to reduce reliance on the US dollar.

Beyond interest rate policy, BI is focused on accelerating credit expansion and financing to priority sectors through macroprudential policies, including the Macroprudential Liquidity Incentive Policy (KLM) .

Credit Growth and Interest Rate Transmission

As of January 2026, credit growth reached +9.96% year-on-year, aligning with BI’s 2026 target range of +8–12% . Investment credit saw the largest increase at +22.38% year-on-year, while working capital and consumption credit grew by +4.13% and +6.58% respectively.

While the BI Rate has been cut by 125 basis points during 2025, the transmission to new deposit rates has been -68 bps since January 2025 to 4.13% (vs. December 2025: 4.25%), and credit interest rates have fallen by -40 bps since January 2025 to 8.80% (vs. December 2025: 8.81%). However, new credit interest rates have fallen further to -75 bps.

Market Performance and Economic Indicators

• IHSG: Market corrections are currently underway .
• Cement Sales (SMGR): Semen Indonesia reported an +11.7% year-on-year increase in cement sales volume in January 2026, despite a -5.6% month-on-month contraction .
• Government Bond Auctions: Demand for Indonesian government bonds at the February 17, 2026 auction fell to the lowest level since January 2025 .
• Oil Prices: Brent oil prices rose +4.35% to US$70.35/barrel on February 18, 2026, driven by geopolitical tensions .

Looking Ahead

BI will continue to assess the potential for further BI Rate reductions, focusing on strengthening the transmission of monetary and macroprudential easing and closely monitoring economic conditions. Bloomberg consensus still expects both BI and the Fed to cut interest rates by -50 bps each by the end of 2026 .