Bank Indonesia (BI) has decided to keep its benchmark interest rate unchanged at 4.75% following the Board of Governors’ Meeting held on January 20–21, 2026. The decision was taken amid continued pressure on the rupiah, which has weakened toward IDR 17,000 per USD. 

The central bank also maintained the deposit facility rate at 3.75% and the lending facility rate at 5.50%. 

“This decision is consistent with the current policy focus, namely efforts to stabilize the rupiah exchange rate amid rising global uncertainty, support the achievement of the 2026–2027 inflation targets, and encourage economic growth,” Bank Indonesia Governor Perry Warjiyo said during a press conference on January 21. 

Perry noted that the rupiah exchange rate on Tuesday, January 20, stood at IDR 16,945 per USD, marking a depreciation of 1.53% year to date. He explained that the weakening of the rupiah was driven by foreign capital outflows amid heightened uncertainty in global financial markets, as well as increased demand for foreign exchange in line with economic activity. 

“To maintain stability, BI will intensify measures to stabilize the rupiah through interventions in both offshore and onshore markets,” he said. 

BI projects Indonesia’s economic growth in 2025 to range between 4.7% and 5.5%. In 2026, economic growth is expected to increase to between 4.9% and 5.7%. 

Factors Behind the Rupiah’s Weakening: From Trump to Thomas Djiwandono 

The movement of the rupiah exchange rate is influenced by multiple factors. Currency and digital asset market observer Ibrahim Assuaibi said the current weakening of the rupiah has been affected, among other factors, by tariff threats from United States President Donald Trump, who has proposed a 10% tariff on eight European countries opposing Washington’s plan to acquire Greenland. 

He added that other external factors, including developments surrounding the summoning of Federal Reserve Chair Jerome Powell by the U.S. Attorney General’s Office, speculation over U.S. interest rate policy, and the latest U.S. labor market data, have also put pressure on the rupiah. 

“The weakening of the rupiah is indeed due to a combination of complex issues, both external and internal,” Ibrahim said on January 20. 

On the domestic front, he said market participants are concerned about Indonesia’s fiscal deficit, which approached 3% of gross domestic product at the end of last year. Investors remain worried that pressure on tax revenues could persist and potentially widen the fiscal deficit. 

“Meanwhile, the nomination of Thomas Djiwandono as a candidate for BI Deputy Governor has had an impact on the rupiah, but not a significant one,” he said. 

Senior Economist at KB Valbury Sekuritas, Fikri C. Permana, said that Thomas Djiwandono’s inclusion among potential candidates for BI Deputy Governor weighed on the rupiah due to concerns over possible disruptions to Bank Indonesia’s independence. 

However, Finance Minister Purbaya Yudhi Sadewa dismissed speculation that the rupiah’s weakening was linked to the discourse surrounding the potential appointment of Deputy Finance Minister Thomas Djiwandono as BI Deputy Governor. 

The speculation emerged amid concerns that BI’s independence could be compromised if a former government official, who is also a nephew of President Prabowo Subianto, were appointed to the central bank’s board of governors. 

“There is nothing unusual. As for independence, there is no connection unless there is direct government intervention in decision-making. So far, there has been none. BI remains independent,” Purbaya said.

This article is published in partnership with Katadata 

Original article here