Bank Indonesia Holds Interest Rates Steady Amid Rupiah Weakness and Global Uncertainty

Bank Indonesia (BI) maintained its benchmark interest rate, the BI Rate, at 4.75% on Tuesday, March 17, 2026, a decision aligned with market expectations. This decision comes as the Indonesian Rupiah faces downward pressure due to concerns over a widening budget deficit, rising oil prices, and the potential delay of anticipated interest rate cuts in the United States, exacerbated by geopolitical tensions in Iran.

Rupiah Depreciation and BI’s Response

The Rupiah has weakened by 1.74% since the beginning of 2026, continuing a trend observed throughout 2025, which saw a 3.52% decline. In response, Bank Indonesia announced measures to support the Rupiah’s stability, including a reduction in the foreign exchange cash purchase limit without underlying documents from US$100,000 to US$50,000 per month. Limits for DNDF/Forward sales and swap purchases and sales were increased from US$5 million to US$10 million per transaction. These policy changes will take effect in April 2026.

Governor Perry Warjiyo reiterated BI’s commitment to intensifying intervention in the foreign exchange market to bolster the Rupiah. BI expressed confidence that the Rupiah will stabilize, supported by its intervention efforts, attractive yields, and Indonesia’s positive economic growth prospects.

Global Economic Factors Influencing BI’s Decision

Bank Indonesia noted that the ongoing conflict in Iran is dampening global economic growth prospects although simultaneously increasing global inflation, potentially delaying anticipated cuts to US interest rates. The increase in US government bond yields and the US dollar index (DXY) amid the escalating conflict have also contributed to capital outflows from developing countries and subsequent currency weakening.

Bloomberg reported that Bank Indonesia is removing statements regarding the prospect of lowering interest rates, indicating a focus on maintaining the BI Rate to support exchange rate intervention and preserve adequate foreign exchange reserves.

Market Reaction and Corporate Developments

Following the BI Rate announcement on Tuesday, March 17, the Rupiah closed up 0.03% at 16,985 against the US dollar. The 10-year government bond yield fell slightly by around 2 basis points to 6.896%, and the Jakarta Composite Index (JCI) closed up 1.2% to 7,106.8.

Key Corporate Updates:

• United Tractors (UNTR): The government has reinstated operating permits for PT Agincourt Resources, a subsidiary of United Tractors, based on environmental impact studies.
• Bumi Resources Minerals (BRMS): Reported a net profit of US$12.5 million in the fourth quarter of 2025, resulting in a full-year net profit of US$50 million.
• Bank Mandiri (BMRI): Plans a share buyback program with a fund allocation of IDR 1.17 trillion, pending shareholder approval in April 2026.
• Vale Indonesia (INCO): Posted a net profit of US$24 million in the fourth quarter of 2025, with a full-year net profit of US$76 million.
• Pyridam Farm (PYFA): Announced plans for a rights issue of up to 5.7 billion new shares to fund acquisitions and business development.
• Bank Tabungan Negara (BBTN): Reported that the government has placed over IDR 100 trillion in budget balance funds within the banking system, with state-owned banks receiving the largest allocations.
• Sumber Alfaria Trijaya (AMRT): Shareholders purchased approximately 2.6 billion shares of AMRT from current controllers at an average price of Rp. 1,420 per share, valued at Rp. 3.6 trillion.
• Darma Henwa (DEWA): PT CGS International Securities Indonesia sold approximately 300 million DEWA shares.
• Rukun Raharja (RAJA): PT Sentosa Bersama Mitra increased its ownership stake in Rukun Raharja.
• Total Bangun Persada (TOTL): Secured new contracts valued at IDR 6.87 trillion for 2025, exceeding their initial target.
• Bank Central Asia (BBCA): Director Lianawaty Suwono purchased 300,000 BBCA shares.
• Garudafood (GOOD): Plans a share buyback of up to 143.3 million shares.

Key Takeaways

• Limited prospects for US interest rate cuts are likely to constrain room for cuts in the BI Rate.
• Bank Indonesia is prioritizing Rupiah stability through intervention and policy adjustments.
• Geopolitical risks and global economic conditions are key factors influencing BI’s monetary policy.