Bank Indonesia BI-Rate held at 5.75%; deposit rate up to 5.00%

Key takeaways

• Bank Indonesia held the BI-Rate at 5.75% after its 20–21 October 2026 Board of Governors meeting, the fourth straight hold since 100 basis points of hikes in May and June.
• The official press release confirms the Deposit Facility rate was raised 25 bps to 5.00%, while the Lending Facility rate stayed at 6.50%. Some local reports said the deposit rate was unchanged, but they were wrong.
• Many economists and market participants had expected a hike to 6.00%. BI instead used a "policy mix": cheaper hedging for foreign investors and phased cuts to bank reserve requirements.
• The rupiah closed at Rp17,985 per US dollar on 20 October, according to BI, and traded around 18,040 on 21 October as the decision came out.

Bank Indonesia holds the BI-Rate at 5.75%: what was decided

The Bank Indonesia BI-Rate stayed at 5.75% on 21 October 2026, surprising many economists who expected a hike to 6.00% to defend a weak rupiah. The central bank raised the Deposit Facility rate 25 bps to 5.00%, while the Lending Facility rate stayed at 6.50%. Foreign investors have also been selling Indonesian shares; see IHSG foreign selling and the MSCI trend.

The decision was not a pure hold, though. BI's official release (No. 28/233/DKom) says the Board decided to hold the BI-Rate while "raising the Deposit Facility rate to 5.00%." The rate had been 4.75% since the June hike. The Lending Facility rate, the ceiling of BI's overnight corridor, was left at 6.50%. With a higher floor and an unchanged ceiling, the corridor narrowed from 175 to 150 basis points.

The deposit facility figure matters because Indonesian outlets disagreed about it on the day. CNN Indonesia reported the deposit facility as "maintained" at 5%. BI's own release, Kontan's summary of the full policy mix and FXStreet all describe a 25 bp increase to 5.00%. Bullquill has used the central bank's release as the authoritative record.

Policy rates after the October 2026 meeting

Source: Bank Indonesia press release No. 28/233/DKom (21 October 2026); prior levels from BI's June 2026 decisions as reported by IDNFinancials.

How BI got here: 100 bps of hikes in 2026

BI started the year with the BI-Rate at 4.75%. As the rupiah weakened in the second quarter, it tightened quickly:

• 19–20 May: a 50 bp hike to 5.25%. BI's release shows the deposit facility at 4.25% and the lending facility at 6.00% after that move.
• 9 June: an off-cycle 25 bp hike to 5.50%, explicitly framed as a follow-up to stabilise the rupiah.
• 17–18 June: another 25 bp hike to 5.75%, taking the deposit and lending facilities to 4.75% and 6.50%.

BI then held at 5.75% in July, August and September. October makes it four holds in a row.

Why Destry chose to hold instead of hiking

Going into the meeting, the pressure to hike was obvious. Kontan reported on 18 October that BI was projected to raise the BI-Rate by 25 bps to 6% in October, and quoted a Bank Danamon economist who saw the rate potentially reaching 6.25% by the end of 2026. Bisnis.com reported that most of the economists and analysts it surveyed expected a move to 6.00%. FXStreet described the outcome as "defying market expectations" for a hike. Not every forecaster agreed: Brown Brothers Harriman noted that markets were split.

BI's release and Destry's comments give three main reasons for choosing the policy mix over a rate hike.

1. Targeting capital flows directly

BI's main tool for the rupiah this time is hedging, not the policy rate. It increased the premium discount on domestic non-deliverable forward (DNDF) hedging for foreign funding, such as portfolio inflows, bank foreign loans and FDI. The discount rises from 25% to 40% for six-month contracts and from 30% to 45% for 12-month contracts. According to BI, similar incentives have attracted about US$9.9 billion of foreign inflows since June 2026, as of 20 October. The higher deposit facility rate also tightens short-term rupiah liquidity at the margin without raising the benchmark that loans are priced from. MUFG called this an "asymmetric" move.

2. Inflation is still inside the target

Headline CPI inflation was 3.28% year on year in September, up from 3.19%, and core inflation was 2.84%, according to BI. Both are inside the 2.5% ±1% target range for 2026 and 2027. The pickup came mainly from volatile food prices (5.03%), which BI linked to weather-related supply disruptions. Food inflation of this kind responds poorly to interest rates.

3. Protecting growth and credit

The release stresses that macroprudential and payment-system policies remain "pro-growth". BI projects 2026 GDP growth of 4.9–5.7% and credit growth of 8–12%. Bank lending grew 13.26% year on year in September, but deposits grew only 8.22%. BI said deposit growth needs to be strengthened. Cutting reserve requirements in two steps releases liquidity to banks. Together with a recalibrated macroprudential liquidity incentive, this is intended to keep lending going while the policy rate stays put.

The rupiah and capital flows: the numbers BI is watching

The external backdrop is still difficult. BI's release points to Middle East tensions keeping oil prices high, US monetary policy expected to stay tight for longer and a strong US dollar. It also notes weak foreign sentiment toward Indonesian equities. Equity outflows have been worsened by MSCI's consultation on possibly reclassifying Indonesia from Emerging Market to Standalone Market status, which Bullquill covered in detail here. According to BBH, MSCI expects to announce a final decision by the end of June 2027.

BI's data show that October inflows went mainly into SRBI (BI's own rupiah securities) and government bonds, while equities saw outflows. The new hedging incentives are aimed at that kind of bond money.

What it means

For the rupiah: BI is betting it can steady the currency with targeted tools rather than another broad rate hike. Analysts are not convinced it will be enough. MUFG said the measures could slow rupiah depreciation but are unlikely to reverse it while US yields, energy prices and equity outflows stay high, and it forecasts USD/IDR at 18,350 by the end of 2026. BBH also flagged a wider current account deficit, which BI projects at 1.6–2.4% of GDP for 2026, as a source of pressure. These are institutional forecasts, not certainties.

For borrowers and banks: Since the BI-Rate is unchanged, loan pricing should not get an immediate new push higher. The reserve-requirement cuts add liquidity from November. The higher deposit facility rate gives banks a better return on excess cash parked at BI. That could slightly lift short-term money-market rates.

For the policy outlook: The hold does not close the door to further tightening. BI's release notes a "strong likelihood" of a further US federal funds rate increase. Bullquill's explainer on the Federal Reserve's October debate covers that risk. A Fed hike would add new pressure on emerging-market currencies, including the rupiah. Some economists quoted before the meeting, including at Bank Danamon, still expect BI-Rate at 6.00–6.25% by year-end. For how local equities reacted around the decision, see the Indonesia stocks daily brief for 21 October. Political context is in our report on protests marking two years of President Prabowo's government.

What is not yet known: whether the hedging incentives will bring enough bond inflows to offset equity outflows linked to MSCI, and how BI would react if the rupiah moves decisively beyond Rp18,000. BI has not published a threshold, and any view on that is speculation.

Sources

• Bank Indonesia — BI-Rate Held at 5.75%: Strengthening Stability, Supporting Economic Growth (21 Oct 2026)
• Bank Indonesia — BI-Rate Increased by 50 bps to 5.25% (May 2026)
• Bank Indonesia — BI-Rate Increased by 25 bps to 5.50% (9 June 2026)
• IDNFinancials — BI Rate rises to 5.75% (June 2026)
• CNN Indonesia — BI tahan suku bunga acuan 5,75 persen (21 Oct 2026)
• Kontan — Bauran kebijakan BI pada RDG Oktober 2026
• Kontan — BI diproyeksi kerek BI-Rate 25 bps pada RDG Oktober 2026 (18 Oct 2026)
• Bisnis.com — Bank Indonesia tahan BI Rate 5,75% pada RDG Oktober 2026
• Liputan6 — BI Rate tetap di 5,75%, deposit facility naik jadi 5%
• FXStreet — Indonesian Rupiah declines as BI keeps benchmark rate unchanged (21 Oct 2026)
• FXStreet / BBH — Indonesian Rupiah: BI on hold as MSCI risk weighs (21 Oct 2026)
• MUFG Research — Asia FX Talk (22 Oct 2026)

This article is for information only and is not investment advice.