Jakarta. Bank Indonesia raised its benchmark interest rate by 25 points to 5.50% on Tuesday, delivering an inter-meeting policy tightening as it stepped up efforts to stabilize the rupiah amid escalating Middle East tensions, foreign capital outflows, and strong domestic demand for foreign currency.

The central bank also increased the Deposit Facility rate to 4.50% and the Lending Facility rate to 6.25%.

"The increase is a follow-up measure to strengthen rupiah stabilization amid elevated global volatility caused by the conflict in the Middle East," Bank Indonesia said. "The policy is also a pre-emptive step to keep inflation within the government's target range of 2.5% plus or minus 1% in 2026 and 2027."

Bank Indonesia said the rupiah had weakened more than expected since its May policy meeting due to persistent global uncertainty, strong domestic demand for foreign exchange, and foreign portfolio outflows.

To support the currency, the central bank will raise yields on its Rupiah Securities (SRBI), cut hedging swap costs for foreign investors by 10%, reopen repo auction facilities for banks, and intensify monetary operations and foreign exchange intervention.

Bank Indonesia said it would continue coordinating closely with the government to maintain market liquidity, support investor confidence, and preserve macroeconomic stability.