By Gayatri Suroyo and Stefanno Sulaiman
JAKARTA, Feb 19 (Reuters) – Indonesia’s central bank held rates unchanged for a fifth straight policy review on Thursday, as expected, with its focus remaining on the rupiah after turmoil in the country’s financial markets amid weakening investor confidence.
The rupiah slumped to a record low against the dollar last month as concerns mounted over central bank independence. The currency has remained close to that trough, putting it among the worst-performing emerging Asian currencies so far this year.
Bank Indonesia (BI) considers the rupiah to be “undervalued” compared to Indonesia’s economic fundamentals, Governor Perry Warjiyo said in an online press conference, adding the bank would step up currency intervention in markets on and offshore.
Warjiyo blamed global market uncertainty for the weakness.
“Of course, if we look at exchange rate movements, there are two main factors …, namely fundamental factors such as inflation indicators, economic growth, yields, and other indicators, all of which show that the rupiah should be more stable and tend to strengthen,” Warjiyo said.
“The question, of course, is about technical factors, risk premium factors, especially those occurring globally, which do appear to be causing short-term pressure on the exchange rate,” he added.
BI kept the benchmark 7-day reverse repurchase rate at 4.75%, matching the expectations of all but two of the 29 economists polled by Reuters.
The bank cut its benchmark rate a total of 150 basis points between September 2024 to September 2025, but the easing cycle was interrupted by a depreciating rupiah.
Warjiyo reiterated BI would resume rate cuts once the pressure on the currency eased.
Investor sentiment towards Indonesian assets has soured on concerns that President Prabowo Subianto’s high-growth agenda could hurt fiscal health and central bank independence, as well as warnings about transparency in the stock market.
GROWTH NARRATIVE
Thursday’s decision was the first since Prabowo’s nephew, Thomas Djiwandono, joined the BI board as a deputy governor. His nomination for the position last month triggered the capital outflows that sent the rupiah to its record low.
Since then, index provider MSCI has warned that it could downgrade Indonesian equities due to governance concerns, while credit rating agency Moody’s has downgraded Indonesia’s rating outlook to negative, causing further capital flight and market unease.
At the press conference, Djiwandono said BI was coordinating with the government to better explain the country’s economic growth strategy to investors and rating agencies and ease their concerns.
“Rupiah underperformance amid a pickup in 1Q26 inflation and a steady growth impulse will keep the BI from lowering rates in at least first half of the year,” said DBS Bank economist Radhika Rao.
“Officials clearly want to provide some more support to the economy and, so long as the rupiah stabilises and inflation falls back, we expect 75bps of cuts to 4.00% this year,” said Jason Tuvey, economist with Capital Economics.
Indonesia’s economy grew 5.11% in 2025, its best expansion in three years, data showed earlier this month. BI has a growth outlook of 4.9% to 5.7% for this year, projecting inflation to stay within target through 2027.
Growth in the first quarter would get a boost from fiscal incentives, loose monetary policy, as well as higher spending for Chinese New Year and Eid al-Fitr celebrations, Warjiyo said.
(Reporting by Gayatri Suroyo, Stefanno Sulaiman, and Fransiska Nangoy; Editing by David Stanway and kate Mayberry)
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