[JAKARTA] Bank Indonesia (BI) is facing mounting pressure to raise rates on Wednesday (May 20), as the rupiah’s fall to a historic low battered equities and forces policymakers to prioritise defending the currency over growth support.

Economists now expect that the central bank may raise its benchmark interest rate by 25 basis points to 5 per cent, marking a shift away from its recent accommodative stance as the rupiah sinks to record lows.

Radhika Rao, senior economist at DBS Bank, said the central bank’s next policy decision will likely focus on protecting currency stability rather than supporting growth, especially as domestic inflation remains relatively contained.

“Bank Indonesia is likely to prioritise currency stability at this month’s policy meeting, even as inflation remains benign,” Rao said.

Lavanya Venkateswaran, senior Asean economist at OCBC Bank, shares a similar view, expecting a 25 basis point rate hike as BI steps up efforts to counter depreciation pressures on the rupiah.

She said BI has been steadfast in trying to maintain rupiah stability through a range of measures, including higher rates on its short-term monetary instruments such as BI’s outstanding rupiah bills, known as SRBI.

“However, we now expect the central bank to move towards policy rate hikes as a stronger line of defence against currency pressures.”

BI last raised its benchmark interest rate in April 2024 and kept policy on hold until September that year, before shifting to a monetary easing cycle to support growth.

All time low

The Indonesian currency dropped to