Stock Markets April 22, 2026 06:43 AM

Bank Indonesia Holds Policy Rate at 4.75% While Focusing on Rupiah Strength

Central bank leaves benchmark unchanged, signals readiness to use other tools and intervene in offshore NDFs to support the currency and credit growth

By Derek Hwang
Bank Indonesia Holds Policy Rate at 4.75% While Focusing on Rupiah Strength

Bank Indonesia maintained its policy rate at 4.75% on Wednesday, prioritizing measures to strengthen the Indonesian rupiah, according to a Bank of America research note. The central bank did not rule out further tightening but indicated it may rely on alternative instruments such as steering SRBI yields and intervening in offshore non-deliverable forwards to manage FX levels and inflation while supporting credit growth.

Key Points

  • Bank Indonesia left its policy rate unchanged at 4.75% and signaled readiness to tighten further if required.
  • Authorities may tighten monetary conditions by steering SRBI yields higher rather than formally hiking the policy rate; 12-month SRBI yields are about 90 basis points above the policy rate.
  • FX measures include increased intervention in offshore non-deliverable forwards and allowing some primary dealers to sell in offshore NDFs to align offshore and onshore pricing; spot transactions with valid documentation rose from 89.2% to 93.5%.
  • The central bank lowered its 2026 current account deficit forecast by 40 basis points to a range of 0.5-1.3% of GDP and aims to lift loan growth into the upper half of an 8-12% target range, up from 9.5% year-over-year in March.

Bank Indonesia opted to keep its policy rate at 4.75% on Wednesday, citing a principal objective of facilitating a firmer rupiah, the Bank of America research note said. While the central bank left the policy rate unchanged, it did not preclude future tightening if circumstances require and reiterated its readiness to intervene to preserve currency and price stability.

The central bank said it would maintain accommodative macroprudential settings to continue supporting stronger credit expansion and broader economic growth. In its communication, Bank Indonesia framed its policy stance as balancing the goals of exchange-rate stability with the need to foster household and business lending.

Bank of America analysts expect the policy rate to remain on hold for an extended period. Rather than raising the policy rate outright, the analysts anticipate Bank Indonesia could tighten monetary conditions by nudging SRBI yields higher. At present, 12-month SRBI yields sit at about 90 basis points above the policy rate, according to the note.

In explaining its decision, Bank Indonesia pointed to FX considerations, noting concern about USD-IDR trading slightly above the 17,000 level. The central bank judged the rupiah to be undervalued relative to its fundamentals and said it would step up intervention in offshore non-deliverable forwards as part of efforts to support the currency.

As part of those measures, Bank Indonesia said it would permit some primary dealers to sell in offshore NDFs, aiming to narrow pricing discrepancies between offshore NDFs and onshore foreign exchange markets. This initiative supplements FX management steps announced in March, which coincided with an increase in the share of spot transactions supported by valid underlying documentation - from 89.2% to 93.5%.

The central bank also revised its outlook for the current account deficit in 2026, lowering the forecast by 40 basis points to a range of 0.5-1.3% of GDP. Bank Indonesia emphasized it is prepared to tighten monetary policy further if necessary to keep both the exchange rate and inflation on target.

On credit growth, Bank Indonesia set an objective to lift loan expansion into the upper half of its 8-12% target range for 2026. For context, loan growth stood at 9.5% year-over-year in March, indicating the central bank seeks an acceleration in lending activity as part of its broader economic goals.

Risks

  • Possibility of further monetary policy tightening if FX pressures or inflationary risks materialize - affects banking and credit markets.
  • Persisting volatility in USD-IDR around levels slightly above 17,000 could require more active FX intervention - impacts foreign exchange markets and exporters/importers.
  • Uncertainty whether loan growth will accelerate to the upper half of the 8-12% target range for 2026 given the current 9.5% year-over-year pace in March - relevant for lenders and credit-sensitive sectors.

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