Jakarta. Bank Indonesia’s decision to raise its benchmark interest rate was aimed at stabilizing the rupiah and restoring the attractiveness of domestic financial instruments for foreign investors, according to Deputy Governor Destry Damayanti.

Destry said the rupiah’s recent movement has been shaped by two main factors: Indonesia’s relatively strong economic fundamentals and persistent global pressures weighing on financial markets.

She noted that Indonesia’s economy remained resilient, as reflected in the first-quarter 2026 economic growth of around 5.6%, improving consumer confidence, and stronger corporate sales performance.

“This actually shows that our fundamentals remain solid. We also see that the consumer confidence index has increased,” Destry said during the National Conference on Regional Economic Development in Jakarta on Monday.

Despite the strong domestic backdrop, Destry said external pressures continued to dominate rupiah movements. Global geopolitical uncertainty, including tensions in the Middle East, has weakened many currencies against the US dollar.

At the same time, domestic demand for US dollars typically rises in the middle of the year due to dividend payments, repatriation needs, and the hajj season.

“There is indeed very high demand for dollars. So again, it comes down to supply and demand. Right now, demand is high,” she said.

In response, Bank Indonesia considered it necessary to raise interest rates to improve the competitiveness of rupiah-denominated assets and encourage foreign capital inflows back into the domestic financial market.

“BI raised interest rates because we felt it was still insufficient. We need to push further by increasing rates because we must make our rupiah instruments attractive again, so that inflows can return, at least to our financial markets first,” Destry said.

Bank Indonesia previously raised the BI-Rate by 50 basis points to 5.25% during its May 19-20 board meeting. The central bank also increased the Deposit Facility rate to 4.25% and the Lending Facility rate to 6.00%.

Destry expressed optimism that the policy would strengthen investor and public confidence in Indonesia’s financial markets.

She added that rising US Treasury yields, persistently high inflation in the United States, and the strengthening US Dollar Index (DXY) had forced central banks to shift policy priorities from pro-growth to pro-stability.

“We are facing a situation where stability has become crucial,” Destry said.

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