This study examines the effect of publicly announced changes in official interest rates on March 2016 by Indonesian Government toward the Islamic stock market return during the period from 2005:7 to 2016:5. The interaction between interest rates (BI rate) and Islamic stock market indices is analyzed by employing the Autoregressive Conditional Heteroskedasticity (ARCH) and Vector Autoregressive (VAR) models, the variance decompositions which are generated from the VAR models. The evidence finds that the Islamic stock market returns which taken from Jakarta Islamic Index are positively impacted by decreases in official interest rates. However, the magnitude of interaction is much smaller, showing that the effectiveness of interest rates as a monetary policy tool is still low. This paper adopts the latest time series econometrics technique to test and it is among the earliest attempts to investigate the long run effects domestically on the Islamic stock market.