Jakarta. Bank Indonesia Governor Perry Warjiyo said on Tuesday that the central bank’s decision to raise its benchmark interest rate by 25 basis points to 5.50% was driven primarily by a sharper-than-expected depreciation of the rupiah.

The move came after the Indonesian currency continued to weaken and breached the Rp 18,000-per-dollar level, increasing pressure on policymakers to stabilize financial markets.

According to Perry, the central bank’s latest assessment showed that downward pressure on the rupiah had intensified amid persistent global uncertainty and continued capital outflows from domestic financial markets.

“In our latest evaluations, we found that the rupiah’s depreciation has exceeded our earlier projections,” Perry told reporters at the parliamentary complex in Jakarta.

He said the currency’s weakness was being driven not only by ongoing global market volatility but also by strong domestic demand for foreign exchange and continued outflows of foreign portfolio investment from Indonesia.

“Because the rupiah has weakened beyond what we previously projected, we are taking additional measures to stabilize the exchange rate,” Perry said.

Bank Indonesia’s review since its May 19-20 policy meeting indicated that the rupiah had performed significantly weaker than expected, prompting a reassessment of the central bank’s policy stance.

The rate increase is also intended to keep inflation within the central bank’s target range of 2.5%, plus or minus one percentage point, in both 2026 and 2027, while enhancing the attractiveness of Indonesian financial assets to global investors.

Perry acknowledged that foreign capital outflows from both Bank Indonesia Rupiah Securities (SRBI) and government bonds continued throughout April and May.

In addition to raising the benchmark rate, the central bank has increased yields on SRBI instruments across all maturities -- including six-month, nine-month, and 12-month tenors -- in an effort to attract foreign capital back into Indonesia and strengthen domestic financial-market stability.

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