Bank Indonesia Governor Destry Damayanti during a news conference with Indonesian Finance Minister Suahasil Nazara at the central bank headquarters in Jakarta, Indonesia, Thursday, September 24, 2026. Bloomberg | Bloomberg | Getty ImagesBank Indonesia faces growing pressure to raise interest rates on Wednesday as economists revise their forecasts after global index provider MSCI warned it could downgrade the country’s stock market from its emerging market status, triggering a sell-off in stocks and the rupiah. Citibank now expects a precautionary increase of 50 basis points to 6.25%, abandoning its previous call to make no change. Capital Economics and Permata Bank expect a 25 basis point increase to 6%. The central bank has kept its benchmark seven-day reverse repo rate at 5.75% since June. MSCI said on Friday it is considering moving Indonesia to the “independent” emerging market status it has had since 1989, causing the Jakarta Composite Index to suffer its worst two-day sell-off on record, before recovering about 3% on Tuesday after authorities announced measures to improve market transparency and price discovery, including expulsion from the flagship index of companies with strict holdings. Meanwhile, the rupee weakened to 18,030 per dollar on Tuesday, near its June record low, falling about 8% this year. “Failing to achieve a rate hike [on Wednesday] “A decision to hold rates on Wednesday could also reignite concerns among investors that Bank Indonesia is bowing to political pressure.” headline accelerated to a three-month high of 3.28% in September, within the target range of 1.5%-3.5%, while core inflation slowed to 2.84% “Market sentiment may deteriorate much faster than economic fundamentals,” said Josua Pardede, chief economist at PT Bank Permata, estimating that foreign investors have sold around $5 billion in Indonesian stocks this year. of foreign capital could further weaken the rupiah and trigger the selling of government bonds, he added. stages, from precautionary sales until the first half of 2027 and mechanical sales if MSCI confirms the move in June. “The biggest risk is not simply losing Emerging Market status, but allowing doubts about market integrity to turn into a lasting increase in Indonesia’s cost of capital.”
