Jakarta. Bank Indonesia kept its benchmark interest rate unchanged at 4.75% in March, prioritizing rupiah stability and inflation control as escalating conflict in the Middle East heightens global uncertainty.

The central bank also maintained the Deposit Facility rate at 3.75% and the Lending Facility rate at 5.5% following its March 16–17 policy meeting.

Bank Indonesia Governor Perry Warjiyo said the decision reflects the central bank’s focus on strengthening the rupiah amid worsening global conditions, while keeping inflation within its 2026–2027 target range of 2.5±1%.

“Bank Indonesia will optimize its monetary policy instruments to strengthen external resilience against potential escalation of the Middle East conflict, including taking necessary adjustment measures to remain consistent in maintaining national economic stability,” Perry said during a virtual press conference on Tuesday.

Perry added that macroprudential policies will continue to be reinforced to support economic growth, particularly by boosting credit to the real sector while safeguarding financial system stability.

Meanwhile, payment system policies will be directed to support economic activity through expanded digital payment acceptance, stronger industry structure, and more resilient payment infrastructure.

“The overall policy mix of monetary, macroprudential, and payment system measures is aimed at maintaining stability while also supporting sustainable economic growth,” he said.

Since September 2024, Bank Indonesia has cut its benchmark rate by a cumulative 150 basis points, including 25 bps in September 2024 and 125 bps throughout 2025, bringing the BI-Rate to 4.75% by the end of last year, its lowest level since 2022.

Prior to the decision, economist Teuku Riefky of the University of Indonesia’s Institute for Economic and Social Research (LPEM FEB UI) had projected the central bank would hold rates steady.

He noted that annual inflation reached 4.76% in February 2026, exceeding Bank Indonesia’s target range due largely to a low base effect from electricity tariff discounts in early 2025.

At the same time, the US-Iran conflict has increased risks of imported inflation through higher global energy prices, while also raising concerns over Indonesia’s ability to maintain its fiscal deficit cap of 3%. This, alongside a series of negative outlook revisions by rating agencies, has further weighed on market sentiment.

“In the current environment, Bank Indonesia has limited room to cut rates, and we believe it should maintain the BI Rate at 4.75% to safeguard rupiah stability and control inflation,” Riefky said.

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