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View all search resultsBI digs in heels with out-of-schedule rate hike
Bank Indonesia (BI) has increased the benchmark interest rate outside the routine schedule to shore up the rupiah after a hefty hike at the last Board of Governors' meeting and other measures failed to arrest the currency’s depreciation.
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Bank Indonesia (BI) Governor Perry Warjiyo speaks to reporters on Tuesday after a meeting with the House of Representatives' budget committee in Jakarta. Earlier in the day, BI increased the benchmark interest rate in a surprising announcement outside of the regular monthly schedule. (Antara/Rizka Khaerunnisa)
B
ank Indonesia (BI) has increased its benchmark interest rate outside the routine schedule to shore up the rupiah after a hefty hike at the last board of governors' meeting failed to arrest the currency’s depreciation while market intervention has used up substantial foreign exchange reserves.
The central bank announced its decision to hike the BI Rate by 25 basis points (bps) around lunchtime on Tuesday, during the midday trading break for the local stock market.
After the announcement, BI Governor Perry Warjiyo told reporters that the central bank reviewed its projections every Tuesday to evaluate the impact of the monetary policy.
“After numerous evaluations today, we see how the rupiah weakened beyond what we projected […], which is why we needed to increase the BI Rate, so the rupiah strengthens and stabilizes,” explained Perry.
The move raises the benchmark interest rate to 5.5 percent less than three weeks after a stronger-than-expected 50-bps hike at last month’s board meeting.
The central bank normally makes rate decisions at its scheduled monthly board meetings, which typically fall in the third week of the month. Tuesday’s hike comes just over a week before the regular rate decision is set to be announced on June 18.
The rupiah strengthened following the announcement and rose to around 17,966 per United States dollar in the afternoon before giving back some of the gains to change hands at Rp 18,009 in the evening, up from its nadir of Rp 18,218 recorded in the morning.
