Bank Indonesia hints at reference rate increase

• May 11, 2018

Bank Indonesia (BI) hinted on Friday that it would increase its benchmark seven-day reverse repo rate, which is currently at 4.25 percent, because of consistent external pressure that could potentially disrupt the country’s economy.

The BI’s board of governors will meet on May 16 and 17.

“Bank Indonesia has large enough room to increase the seven-day reserve repo rate. The policy will be implemented consistently and pre-emptively to ensure [economic] stability,” BI said in a statement issued on Friday.

The central bank no longer considers the rupiah’s depreciation to be in line with the country’s macroeconomic fundamentals, and believes that stronger external pressure could potentially affect the continuity of the country’s economic growth.

“BI will firmly and consistently lead and prioritize its monetary policy to ensure stability,” it said.

The global challenges include a possible increase of the Fed Fund Rate, an increase of the global oil price and the geopolitical risks caused by the increasing tension of the United States-China trade dispute and the cancelation of the US-Iran nuclear agreement, which strengthened the US dollar exchange rate against other currencies, including the rupiah.

BI recorded that from May 1 to 9, the rupiah exchange rate against the US dollar weakened by 1.2 percent, while the Thai bath weakened by 1.76 percent and the Turkish lira weakened by 5.27 percent.

Meanwhile, throughout 2018, the rupiah has weakened by 3.67 percent, the Philippine peso by 4.04 percent, the Indian rupee by 5.6 percent, the Brazilian real by 7.9 percent, the Russian rubel by 8.84 percent and the Turkish lira by 11.42 percent. (bbn)

Source: http://www.thejakartapost.com/news/2018/05/11/bank-indonesia-hints-at-reference-rate-increase.html