Jakarta. Indonesia's benchmark interest rate is likely to remain unchanged at 5.5% this week as Bank Indonesia (BI) assesses the impact of its recent aggressive tightening measures while keeping a close watch on persistent pressure on the rupiah, according to the Institute for Economic and Social Research at the University of Indonesia (LPEM FEB UI).

Bank Indonesia is scheduled to hold its monthly policy meeting on June 17-18.

LPEM FEB UI economist Teuku Riefky said the central bank has raised the BI-Rate by a cumulative 75 basis points since its previous monthly meeting, including a 50-basis-point increase in May and an additional 25-basis-point hike during an extraordinary policy meeting on June 9, signaling a significant tightening cycle.

"Considering the gradual monetary tightening implemented since May, the continued foreign exchange interventions, and the need to evaluate the impact of recently adopted measures, we believe Bank Indonesia should maintain its policy rate at 5.5% at the upcoming Board of Governors meeting," Riefky said in LPEM FEB UI's June 2026 macroeconomic analysis report released on Wednesday.

Despite ongoing pressure on the rupiah, inflation remains within Bank Indonesia's target range, reducing the urgency for further rate hikes, he said.

Riefky added that Bank Indonesia could have room to cut interest rates if economic activity shows signs of slowing in the future.

"However, the scope for rate cuts will likely remain limited as long as the rupiah continues to face pressure," he said.

Looking ahead, Riefky expects inflationary pressures to increase, although the risks are likely to stem mainly from supply-side factors, limiting the effectiveness of additional monetary tightening. Addressing these pressures, he said, would require coordination with other government institutions.

"Bank Indonesia remains optimistic that inflation will stay within its target range in June 2026, although short-term risks have increased due to persistent food supply pressures and adjustments to Pertamax and Pertamax Green 95 fuel prices," Riefky said.

On the global front, Riefky pointed to easing geopolitical tensions following reports of a peace agreement between the United States and Iran, which could lead to the reopening of the Strait of Hormuz and help bring down oil prices.

However, he cautioned that while oil prices have retreated from recent highs, the lagged impact of higher energy costs on consumer prices is likely to keep inflation elevated in the near term.

"As a result, the Fed has limited room to cut interest rates, with some analysts expecting no rate cuts throughout 2026," Riefky said.

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