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View all search resultsBI implements third 50 bps rate hike to aid rupiah
Bank Indonesia has decided to raise its benchmark rate by another 50-point basis (bps) in a move to bring down domestic inflation and to safeguard rupiah from depreciating even further against US dollar.
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B
ank Indonesia (BI) has decided to raise its benchmark rate by another 50 basis points (bps) in a move to bring down domestic inflation and to safeguard the rupiah from depreciating even further against the United States dollar.
The rate hike marks the fourth consecutive month of BI’s tighter monetary policy as the central bank brings the benchmark rate to 5.25 percent. Deposit and lending facility rates, meanwhile, also saw another 50 bps rise to 4.5 and 6 percent, respectively.
The central bank’s decision was well above expectations from many analysts and economists. Financial research firm Moody’s Analytics, for instance, forecast only a 25 bps hike.
“The decision to increase interest rates is a front-loaded, pre-emptive and forward-looking measure to reduce overshooting inflation expectations and ensure future core inflation returns to the target range of 3 plus/minus 1 percent in the first half of 2023,” BI Governor Perry Warjiyo told reporters on Thursday.
Read also: BI hikes rate by 50 bps, gap with Fed narrows further
On the other hand, BI expects inflation to continue rising and remain high until the end of this year, albeit lower than the projected consensus. By comparison, BI’s forecast on inflation is less than 5.6 percent, whereas the consensus projects 5.9 percent.
The bank also expects core inflation to keep increasing until the end of this year, reaching 3.5 percent. The increase is expected to continue until the first two months of the first quarter of next year. Nonetheless, thanks to recent measures, BI stated, the hike might be well below what many have expected.
