Bank Indonesia Holds Main Rate at 5.75 Percent as Market Rout Presses the Rupiah

Bank Indonesia left its main interest rate unchanged on Wednesday, Oct 21, 2026, even after the worst stock market rout in the country in more than a quarter of a century and with the rupiah close to a record low. The central bank kept its benchmark seven day reverse repurchase rate at 5.75 percent, its fourth straight hold, and raised its overnight deposit facility rate by 25 basis points to 5.00 percent. The lending facility rate stayed at 6.50 percent.

A split decision under market pressure

The decision landed close to what markets expected, but only just. A Reuters poll of 29 economists found 15 expected no change in the main rate, while the rest expected a rise of at least 25 basis points to stem the selloff. Bank Indonesia had already raised rates by 100 basis points in three moves between May and June 2026 to defend the rupiah.

Governor Destry Damayanti said the decision was aimed at holding the rupiah steady, drawing foreign capital back in and keeping inflation inside the central bank target range, according to the Wall Street Journal report of her press conference. Headline inflation was 3.28 percent in Sep 2026, inside the bank target band of 1.5 percent to 3.5 percent, and core inflation eased to 2.84 percent, which gave the board room to hold the main rate and move the deposit rate instead.

The MSCI shock behind the rout

The pressure came from an index decision, not from the domestic economy. MSCI said last week that it is considering moving Indonesia from emerging market status, which the country has held since 1989, to standalone status, citing concerns about market transparency. The Wall Street Journal reported that a final MSCI decision is expected in Jun 2027. A downgrade would push Indonesian shares out of the main MSCI indexes that global funds track, and force selling by funds that follow those indexes.

The warning set off the selling. The Jakarta Composite Index fell 11.6 percent on Friday, its worst one day fall since January 1998, and fell a further 5 percent in early trading on Monday, Oct 19, 2026, a record breaking two day rout. The index later recovered about 3 percent on Tuesday, Oct 20, 2026 after the authorities announced steps to improve market transparency and price discovery, including removing tightly held companies from the flagship index.

The currency took the strain as well. The rupiah weakened to 18,030 per dollar on Tuesday, Oct 20, 2026, close to the record low of 18,190 per dollar hit in June, and it is down about 8 percent this year, the worst performance among regional currencies in the reporting by Reuters.

What analysts watch next

Before the meeting, some forecasters had changed their calls. Citibank moved from expecting no change to forecasting a preemptive 50 basis point rise, while Capital Economics and Permata Bank expected 25 basis points, according to reporting on Oct 20, 2026.

Now the test moves to November. CIMB analysts said in a recent note, cited by the Wall Street Journal, that weaker investor sentiment, high energy prices, renewed fiscal risks and tighter global monetary conditions could still prompt a quarter point rate rise in November. For now, Bank Indonesia has chosen the smaller tool. It raised what banks earn on overnight deposits, kept the main rate at 5.75 percent, and left the defence of the rupiah to that signal, to intervention and to the transparency steps promised after the MSCI warning.