CIMB expects Bank Indonesia to lift benchmark rate this week, earlier than December forecast

CIMB Treasury and Market Research expects Bank Indonesia (BI) to lift its benchmark interest rate this week, earlier than the December timing it had forecast before. According to Bernama, the call comes as the rupiah faces pressure and further capital outflows remain a risk after MSCI proposed reclassifying Indonesia's equity market.

A quarter-point rise pencilled in for Oct 21

In a research report, CIMB projected an increase of 25 basis points on Oct 21, with the rupiah having slipped past 18,000 to the US dollar. The report, released on Monday, said weak cross-asset sentiment, elevated energy prices, renewed fiscal risks and tighter global monetary conditions may warrant another 25 basis point rise in November. That would lift CIMB's BI-Rate forecast to 6.25 per cent by end-2026. Noting that BI had by then lifted rates by a combined 100 basis points across May and June, CIMB said it could not exclude an even more front-loaded round of tightening.

Stocks fell sharply after the MSCI proposal

MSCI proposed moving Indonesia from Emerging Market to Standalone Market status, which raised concerns about foreign capital leaving. Early trading on Friday saw the Jakarta Composite Index (IHSG) slide by over eight per cent, which led the Indonesia Stock Exchange to pause activity for 30 minutes. By the close of the session, the index had lost 11.57 per cent, finishing at 5,185.10.

If the proposed change were put in place, passive equity outflows of US$2 billion to US$3 billion could follow, CIMB estimated, and selling by active funds could add to the effect. The research house said equity weakness could last one to three months, and warned of wider risks such as delayed foreign direct investment commitments and fresh outflows from other domestic assets. Weaker investor sentiment, high oil prices, inflation and fiscal worries, along with tighter global monetary conditions, were also likely to curb the amount of foreign money flowing into Indonesian government bonds, it said.

Shrinking reserves limit intervention

CIMB said falling foreign exchange buffers were restricting BI's ability to absorb outside shocks through intervention alone. In the first half of 2026, gross reserves fell by US$11 billion, while net reserves, once adjusted, dropped by US$18.2 billion. CIMB pointed to net reserves, which strip out short-term obligations and net short forward positions, and said: "At US$114 billion in Aug, net reserves are nearing the 2018 low of US$108 billion,"