Bank Indonesia is widely expected to raise its benchmark seven-day reverse repurchase rate by 25 basis points to 5.00% on Wednesday, according to a slim majority of economists in a Reuters poll.
The rupiah has fallen about 5% since late February amid geopolitical tensions and concerns over fiscal management, despite regular central bank intervention.
Sixteen of 29 economists surveyed between May 11 and 18 forecast the rate hike. The overnight deposit and lending facility rates are also expected to rise by 25 bps each, to 4.00% and 5.75%.
"The key rationale for a rate hike would be the depreciation of the rupiah," said Tay Qi Hang of the Economist Intelligence Unit, citing a lack of market trust in current measures to support the currency.
However, 13 economists expect BI to hold steady at 4.75%, believing the central bank will continue relying on foreign exchange intervention rather than an actual rate increase.
Inflation remains benign at 2.42%, within BI's target range, due to government fuel subsidies. Some analysts view a potential hike as pre-emptive, possibly marking the start of a tightening cycle. Year-end median forecasts peg the rate at 5.00%, though there is no consensus.