Bank Indonesia’s new mandate faces first market test after rate hike

[JAKARTA] Bank Indonesia’s (BI) surprise rate hike this week is emerging as an early test of whether the central bank can reassure investors that its independence remains intact, after lawmakers expanded its mandate to support economic growth.

While the latest rate increase suggests BI remains focused on defending the rupiah and preserving stability, economists said the bigger question is what happens when those objectives come into conflict with growth.

Harry Baskoro, an economist and former senior deputy director at BI, said markets generally expect the central bank to prioritise monetary and financial stability when difficult trade-offs emerge. “Growth matters, but stability is the foundation upon which sustainable growth is built,” he said.