Indonesia central bank raises benchmark interest rate by 50 bps to 4.75% as expected

INDONESIA’S central bank raised its policy rates by 50 basis points (bps) on Thursday (Oct 20), as expected, as it sought to curb rising inflation, while trying to slow capital outflows that have weighed on the rupiah.

Bank Indonesia (BI) hiked the benchmark seven-day reverse repurchase rate to 4.75 per cent, in line with the expectations of 17 out of the 30 economists polled by Reuters. The remaining 13 economists had expected a smaller 25 bps hike.

The move follows a 50 bps increase in September, and marks the first consecutive 50 bp increases since BI adopted the seven-day reverse repo rate as its benchmark in 2016.

Governor Perry Warjiyo said the rate decision was aimed at bringing inflation back within target in the first half of next year and at ensuring the rupiah reflects its fundamental value against a strong US dollar.

With Thursday’s move, BI has raised its policy rates by a total of 125 bps since August. REUTERS