Bank Indonesia holds rate at 5.75%, raises deposit rate to defend rupiah
File photo: CEphoto, Uwe Aranas (CC BY-SA 3.0), via Wikimedia Commons
Bank Indonesia kept its BI-Rate at 5.75% on October 21, 2026, but raised its deposit facility rate to 5.00% and cut banks' reserve requirements to steady the rupiah.
What Happened
Bank Indonesia, the central bank of Indonesia, kept its main policy rate, the BI-Rate, unchanged at 5.75% on Wednesday, October 21, 2026, at the end of a two-day meeting. At the same time it raised its deposit facility rate by 0.25 percentage point to 5.00% and announced cuts to the share of deposits banks must hold in reserve. The mix of measures is aimed at attracting foreign money and steadying the rupiah, which had weakened past 18,000 to the US dollar.
Key Facts
- BI-Rate: held at 5.75% for a fourth straight meeting, on October 21, 2026.
- Expectations: many economists had expected a 0.25 point rise to 6.00%; a Reuters poll was split, with 15 of 29 expecting no change.
- Deposit facility rate: raised to 5.00% from 4.75%; the lending facility rate held at 6.50%.
- Reserve requirements for conventional banks: cut from 9% to 8% on November 1 and to 7% on December 1, 2026.
- Reserve requirements for Islamic banks: cut from 7.5% to 6.5% on November 1 and to 5.5% on December 1.
- Earlier tightening: the bank raised rates by a total of one percentage point in May and June 2026.
- Currency: the rupiah weakened to about 18,043 per dollar by October 19, amid concern over a possible downgrade by index provider MSCI.
- Stated aims: attract foreign inflows, keep the rupiah stable and deepen the money and foreign exchange markets.
Why It Matters
Bank Indonesia faced a familiar emerging-market problem: a weak currency. When the rupiah falls, imports such as fuel cost more, inflation can rise, and foreign investors may pull money out, weakening the currency further. Raising the main rate would have made all borrowing more expensive across the economy. Instead, the bank raised the rate it pays banks that park money with it, the deposit facility rate. That makes holding rupiah more attractive for lenders and investors, supporting the currency, without directly raising the cost of loans to households and businesses.
The reserve requirement cuts work in the other direction. A reserve requirement is the share of customer deposits a bank must keep with the central bank rather than lend. Lowering it frees cash for banks to lend or invest, supporting credit and liquidity in the financial system. Analysts described the package as a policy mix: tighter at the edge to defend the currency, looser in the banking system to keep money flowing.
The decision matters beyond Indonesia. Several Asian central banks are facing the same pressures this month from a strong US dollar and high oil prices. India's Reserve Bank raised its repo rate to 5.50% in October, and South Korea's central bank held its rate on October 22 after two hikes, as the network reported. How each country balances currency defence against growth shapes where global investors put their money in Asia, including in Indian markets.
| | Measure | Before | After | |
|---|---|---|
| | BI-Rate | 5.75% | 5.75% (held) | |
| | Deposit facility rate | 4.75% | 5.00% | |
| | Lending facility rate | 6.50% | 6.50% (held) | |
| | Reserve requirement, conventional banks | 9% | 8% from Nov 1, 7% from Dec 1 | |
Impact
Short-term: The higher deposit rate is meant to support the rupiah in coming weeks, while banks get extra liquidity from November 1. Markets will watch whether the currency steadies without a hike in the main rate.
Long-term: If the rupiah keeps weakening, Bank Indonesia may still have to raise the BI-Rate, which would slow borrowing and growth. If the mix works, it could become a model for other emerging-market central banks trying to defend their currencies without choking credit.
Who is affected: Indonesian borrowers and banks, importers and exporters, foreign investors in Indonesian bonds and shares, and investors comparing returns across Asian markets, including India.
Key Takeaway
Bank Indonesia held its main rate at 5.75% on October 21, 2026, but raised its deposit rate and cut reserve requirements, using a policy mix to defend the rupiah while keeping credit flowing.
Questions and Answers
What did Bank Indonesia decide on October 21, 2026?
It kept the BI-Rate at 5.75%, raised the deposit facility rate by 0.25 point to 5.00%, held the lending facility rate at 6.50%, and announced cuts in banks' reserve requirements from November 1.
Why did Bank Indonesia raise only the deposit rate?
Raising the deposit facility rate makes holding rupiah more attractive and supports the currency, without directly raising borrowing costs across the economy as a BI-Rate hike would.
How weak is the Indonesian rupiah?
The rupiah had weakened to about 18,043 per US dollar by October 19, 2026, amid worries about a possible downgrade by the index provider MSCI.
What are the new reserve requirements for Indonesian banks?
For conventional banks, the requirement falls from 9% to 8% on November 1 and to 7% on December 1, 2026. For Islamic banks, it falls from 7.5% to 6.5% and then to 5.5% on the same dates.
Disclaimer: Prepared by the Peepals newsroom from publicly available sources with AI assistance. Information is accurate to the best of our knowledge at the time of publication and may change. Images may be representative. Not professional advice. Report an error via our contact page.
Sourced and fact-checked by the Peepals Global Editorial Team
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Reported, fact-checked and published by the Peepals Global Editorial Team.
