Bank Indonesia now has two jobs that pull in opposite directions

Until recently Bank Indonesia had one main task: keep prices and the rupiah steady. The central bank law, Law No. 4/2023, was amended in June, and the bank is now also told to support economic growth. An analysis published by Fulcrum, the commentary site of Singapore's ISEAS-Yusof Ishak Institute, calls the result "constrained central bank independence". Independence here means something simple: the people who set interest rates should be able to say no to the government of the day. The same law weakened that. The DPR can now dismiss board members for poor performance, in place of the protections they used to have.

The two jobs are already working against each other. To hold the rupiah up, the bank keeps short-term interest rates high, which makes borrowing dearer and slows the economy. At the same time it buys long-dated government bonds and pushes cash into banks, which does the opposite. About Rp300 trillion, roughly 17 billion dollars, has moved from the central bank into state-owned banks. Credit at state-owned companies is now growing more than twice as fast as lending to private firms, which the writer reads as money following government instruction rather than business demand. Looking at the data from January 2022 to June 2026, the analysis finds the bank's behaviour changed sharply around November 2024.

Destry Damayanti took over as governor in early September, after Perry Warjiyo resigned in July. Markets welcomed her: the rupiah firmed 1.4 per cent to 17,763 against the dollar and the Jakarta stock index rose 6.6 per cent. The argument here is that the problem is the mandate, not the person. The fixes proposed are blunt ones: put price and rupiah stability back on top, take the dismissal power away from the DPR, and let the bank and the finance ministry act jointly only in a declared crisis, with a date for stopping.

Why it matters

If you borrow to run a small business, cheap credit going first to state companies means you pay more for yours, or wait longer. Savers face the other side: a central bank told to support growth is slower to defend the value of money in your account. Watch for a rate cut while the rupiah is still weak, because that is the clearest sign of which job won.