Bank Indonesia Holds Rate at 5.75%, Uses Incentives to Support Rupiah

Bank Indonesia (BI) left the BI Rate unchanged at 5.75%, opting for targeted capital-flow incentives rather than further tightening to support the Indonesian rupiah. The measures include cutting hedging costs and enhancing macroprudential liquidity tools, a strategy that echoes the Reserve Bank of India's approach.

Commerzbank's Charlie Lay noted that the move aims to attract inflows without hiking rates, providing a buffer for the currency without stifling growth. The decision reflects a preference for non-rate tools to manage external pressures.