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Bank Indonesia Holds Interest Rate at 4.75% Despite Deteriorating Global Conditions Due to War

Erlina Fury Santika 26/03/2026 08:15 WIB

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The BI maintained its benchmark interest rate at 4.75% on March 17, 2026. The interest rate was kept despite the worsening global conditions caused by the war.

Reference Interest Rate of Bank Indonesia (January 2022 - March 2026)

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Reference Interest Rate of Bank Indonesia (January 2022 - March 2026)

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Bank Indonesia (BI) held its benchmark interest rate at 4.75%, as agreed upon at the BI Board of Governors Meeting held on March 16-17, 2026.

In line with that, the deposit facility rate also remained at 3.75%, and the lending facility rate at 5.50%.

BI Governor Perry Warjiyo stated that the decision was made despite deteriorating global economic prospects due to the war in the Middle East, between the United States-Israel and Iran, which erupted since late February 2026.

"The surge in global oil prices has negatively impacted international trade supply chains, thereby reducing global economic growth prospects and increasing global inflationary pressures," Perry said in a written statement on the BI website, Tuesday last week (March 17, 2026).

Perry added that global financial markets have also deteriorated with the strengthening of the US dollar, rising US Treasury yields, and capital outflows from developing countries or emerging markets.

These dynamics are predicted to slow global economic growth in 2026 to 3.1% from the previous forecast of 3.2%, despite a reduction in US reciprocal tariffs.

"Global inflationary pressures have also increased from 3.8% to 4.1%, narrowing the room for global monetary policy easing, including the possibility of further delays in the Fed Funds Rate (FFR) reduction," Perry said.

Furthermore, Perry noted that US Treasury yields continue to rise due to widening US fiscal deficits, including increased budget allocations for war financing.

In addition, global investment risk premiums have also increased, causing a shift in capital flows toward safe-haven assets, particularly to the US money market. The US dollar index against major currencies (DXY) has strengthened.

"The deterioration of the global economy and financial markets due to the Middle East war is further pressuring emerging market currencies and complicating their economic management," Perry said.

For this reason, Perry emphasized the need to strengthen fiscal and monetary policy responses and synergies to maintain external resilience while continuing to support domestic economic growth.

Editor : Erlina Fury Santika

"Disclosure: This is an AI-generated translation of the original article. We strive for accuracy, but please note that automated translations may contain errors or slight inconsistencies."

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Bank Indonesia Holds Interest Rate at 4.75% Despite Deteriorating Global Conditions Due to War

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