Bank Indonesia raised its benchmark interest rate by 50 bps to 5.25% at its May 2026 policy meeting, delivering a larger-than-expected increase as markets had anticipated a 25 bps hike to 5%. The move marked the central bank’s first rate hike since April 2024, aiming to strengthen the rupiah, curb imported inflation risks, and keep inflation within the government’s 2.5% ±1% target range. The rupiah weakened 2.2% from end-April to Rp17,700 per US dollar on May 19. Meanwhile, annual inflation eased to 2.42% in April 2026 from 3.48% in March, the lowest since August 2025 and still within the central bank’s target range. The decision aligns with the “pro-stability” focus of monetary policy aimed at strengthening Indonesia’s external resilience amid global uncertainty. Meanwhile, macroprudential and payment system policies remain geared toward supporting growth (“pro-growth”). The central bank also raised its overnight deposit facility rate to 4.75% and its lending facility rate to 6.0%.