Jakarta. Indonesia’s recent interest rate increases are beginning to deliver the desired results by slowing the rupiah’s depreciation against the US dollar and helping calm turbulence in the stock market, according to a senior government official.

The latest move came earlier this week when Bank Indonesia raised its benchmark BI Rate by 25 basis points to 5.75%, bringing cumulative increases over the past month to 100 basis points.

“I believe Bank Indonesia has carefully considered all factors, and fortunately, the results have been quite positive,” Susiwijono Moegiarso, secretary at the Coordinating Ministry for Economic Affairs, said in Jakarta.

“The rupiah has remained relatively stable in the Rp 17,700–17,800 per dollar range and has not weakened to Rp 18,000. The stock market index has also remained above 6,000 in recent days. The policy has been quite effective,” he said.

According to Susiwijono, Bank Indonesia’s interest-rate decisions take into account both domestic and global economic conditions, including monetary policy in the United States.

One of the central bank’s concerns has been the possibility of further tightening by the US Federal Reserve, which could trigger capital outflows from emerging markets such as Indonesia.

“What we worry about is a rate increase by the Fed because it would certainly encourage capital outflows from Indonesia,” he said.

BI-Rate Hike Isn't a Silver Bullet
Denni Purbasari, chief economist at the Indonesian Business Council, said Bank Indonesia’s decision was understandable given persistent global pressures.

She noted that the Federal Reserve recently kept its benchmark interest rate unchanged at 3.5%–3.75%, while the Bank of Japan raised its policy rate to 1%, developments that continue to shape global capital flows.

“As a small open economy, Indonesia cannot completely separate its monetary policy from global dynamics,” Denni said.

She explained that interest-rate differentials between Indonesia and advanced economies influence capital movements, exchange-rate stability, and broader financial-market conditions.

In that context, the BI Rate increase is aimed at supporting the rupiah, maintaining market confidence, anchoring inflation expectations, and safeguarding financial stability.

According to Denni, the central bank’s actions should be viewed primarily as a response to external pressures rather than an attempt to curb domestic demand.

However, she cautioned that interest rates alone cannot ensure long-term currency stability.

“Exchange-rate stability cannot rely solely on interest-rate policy,” Denni said. “Indonesia needs a more credible policy mix, particularly through fiscal discipline, stronger fiscal space, and consistent economic policymaking, so that pressure on the rupiah can ease in a more sustainable manner.”