October 21: Bank Indonesia kept its benchmark interest rate at 5.75% on Wednesday but increased the rate on its overnight deposit facility to 5.00%, a targeted adjustment as policymakers face renewed pressure on the rupiah. The central bank’s announcement was corroborated by Reuters and Indonesia’s ANTARA news agency.
Key highlights
- The benchmark BI-Rate remains 5.75%.
- The deposit facility rate rises by 25 basis points to 5.00%; the lending facility stays at 6.50%.
- Officials are strengthening incentives for domestic foreign-exchange hedging.
- The decision follows renewed market pressure, rather than a return to benchmark rate cuts.
One rate changed, two held steady
According to Bank Indonesia, the October 20–21 Board of Governors meeting retained the main policy rate and lending facility setting while raising the deposit facility rate. ANTARA reported that Destry Damayanti announced the decision at a press conference in Jakarta.
The distinction matters: an unchanged benchmark does not mean every monetary policy setting is unchanged. The deposit facility is the central bank’s overnight placement facility for banks. It is not a promise that every Indonesian household’s savings account will immediately earn 5%.
At a glance
| Instrument | October 21 setting | Decision |
|---|---|---|
| BI-Rate | 5.75% | Unchanged |
| Deposit facility | 5.00% | Up 25 basis points |
| Lending facility | 6.50% | Unchanged |
Our calculation: the distance between the deposit and lending facility rates is now 1.50 percentage points: 6.50 minus 5.00. A 25-basis-point increase means 0.25 percentage points, not a 25% rise in the stated rate.
Why the rupiah is central to the decision
Reuters reported that this was the fourth consecutive review without a benchmark change. It described a record two-day stock-market selloff and a rupiah trading near its historical low. In the Reuters poll, 15 of 29 economists expected a hold; the others anticipated an increase of at least 25 basis points.
The agency linked the renewed pressure to MSCI’s warning that Indonesian equities could be moved to standalone market status. That was a warning about a possible classification change, not confirmation that a final reclassification had already happened.
Reuters also reported that the bank had increased rates by a cumulative 100 basis points in three moves between May and June to defend the currency. Wednesday’s adjustment therefore needs to be read against that earlier tightening, rather than as an isolated decision.
Hedging incentives and the inflation objective
ANTARA reported that the bank would strengthen incentives for Domestic Non-Deliverable Forward, or DNDF, transactions with Bank Indonesia. Damayanti said the measures aimed to attract capital, support exchange-rate stability and deepen domestic money and foreign-exchange markets.
The same report said policy remained directed at keeping inflation within the 2.5%, plus or minus one percentage point, target for 2026 and 2027. These are policy objectives, not guarantees about future prices or exchange rates.
What to watch
The next useful indicators will be whether currency pressure eases, how money-market rates respond and what the bank says about implementation of its hedging incentives. For businesses with foreign-currency costs, the practical issue is the availability and price of hedging, alongside the headline interest-rate decision. This report does not predict the rupiah’s next move or offer an investment recommendation.
File photo: Lembaga Penjamin Simpanan, 2019; government-work public-domain status in Indonesia; cropped and resized. Image source · Licence.
Sources
- Bank Indonesia: BI-Rate Held at 5.75%: Strengthening Stability, Supporting Economic Growth
- ANTARA: BI rate holds at 5.75 percent, deposit facility rate at 5 percent
- Reuters: Indonesia’s central bank keeps main rate unchanged, hikes deposit facility rate
The Business Desk covers markets, the economy, companies and personal finance. Stories are checked against at least two credible sources before publication.
