Indonesia central bank hikes rate by another 50 points
INDONESIA’S central bank raised its key interest rate by 50 basis points (bps) for a third consecutive monthly meeting as it sought to rein in inflation expectations while supporting the rupiah.
Bank Indonesia (BI) raised the seven-day reverse repo rate to 5.25 per cent, as expected by the majority of economists polled by Reuters. It also raised its other policy rates by the same amount.
BI governor Perry Warjiyo told an online news conference that the central bank would strengthen monetary policy response to lower inflation expectations.
The “front-loaded, pre-emptive, forward-looking” measure was made to guide core inflation back within target in the first half of 2023, and also step up support for the rupiah, he said.
With Thursday’s (Nov 17) move, BI has increased interest rates by a total of 175 bps since August, matching the scale of its last tightening cycle in 2018.
The rupiah was largely unchanged after the decision. It has fallen nearly 9 per cent against the US dollar in volatile trading in recent months, as the greenback has been buoyed by the Federal Reserve’s aggressive monetary tightening.
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While Indonesia’s inflation rate eased to 5.71 per cent in October, it remained above the BI’s 2-4 per cent target range for the fifth straight month and near a seven-year high of 5.95 per cent.
Some economists expect inflation to accelerate further towardss the end of the year, after the government raised subsidised fuel prices by about 30 per cent in September.
BI has said core inflation – running at 3.31 per cent in October – would rise above 4 per cent by the end of this year or early 2023.
The bank’s decision came after data showed Indonesia’s economy expanded 5.72 per cent from a year earlier in the third quarter, the fastest pace in over a year. REUTERS
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