Bank Indonesia’s emergency hike buys time for battered rupiah, but investor doubts linger

[JAKARTA] Bank Indonesia’s (BI) surprise emergency rate hike may buy the battered rupiah some breathing room, but it also reveals the conundrum facing policymakers as external shocks, capital outflows and investor unease over policies collide in South-east Asia’s largest economy.

The decision also highlights the tension between the immediate need to stabilise a falling currency and the government’s broader push to stimulate economic growth.

The central bank raised its benchmark seven-day reverse repo rate by 25 basis points (bps) to 5.5 per cent on Tuesday (Jun 9), in an unscheduled move that analysts described as necessary to defend the rupiah after it became one of the world’s worst-performing emerging-market currencies this year, amid growing global volatility from the conflict in the Middle East.