Trimegah Economist Says Bank Indonesia Holds Rate at 5.75 Percent
Trimegah economist argues Bank Indonesia should use FX tools rather than rate hikes to stabilize the rupiah.
Key points
- Bank Indonesia maintains the BI-Rate at 5.75 percent while expanding FX swap incentives by 12.5 percent.
- The Reserve Bank of India attracted 143.6 billion dollars in inflows via a concessional swap facility.
- Trimegah economist suggests Indonesia use temporary, capped hedging tools to favor long-term capital.
Bank Indonesia holds the BI-Rate at 5.75 percent. Trimegah economist Fakhrul Fulvian says this stance is correct. He argues that rate hikes are not the only tool to support the rupiah.
Fulvian notes that global yields and oil prices drive current FX pressure. Specific instruments like FX swaps address these sources more directly. This approach avoids raising borrowing costs for the entire economy.
BI separates money price from FX risk
Bank Indonesia expanded FX swap incentives in August 2026. The premium reduction incentive increased by 12.5 percent. This covers bank foreign loans and foreign direct investment.
The central bank now distinguishes between the price of money and FX risk. It also manages domestic liquidity separately. Fulvian says this prevents one policy from solving all problems.
India's swap facility attracts 143.6 billion dollars
The Reserve Bank of India uses concessional swaps. This tool attracted 143.6 billion dollars in inflows by September 2026. The facility offers attractive hedging terms for a set period.
This success created a domestic liquidity surplus in India. The RBI had to absorb excess liquidity later. Fulvian cites this as a cautionary example for Indonesia.
Temporary capped facilities target long-term capital
Fulvian recommends temporary and capped hedging facilities for Indonesia. These tools should favor long-term capital over short-term flows. Investors holding funds longer receive greater currency risk intermediation.
A staggered exit design prevents simultaneous capital withdrawal. This avoids shifting FX pressure to the next period. The policy must be sensitive to fund duration to be effective.
