Indonesia: BI follows Fed, raises key rate to 5.75 percent

• Sep 27, 2018

Bank Indonesia (BI) followed on Thursday the United States Federal Reserve’s move to raise its policy rate in an effort to manage the current account deficit and to maintain the competitiveness of the domestic financial market.

Following a two-day BI board of governors meeting, the central bank decided to increase its policy rate – the seven-day reverse repo rate – by 25 basis points (bps) to 5.75 percent. Lending facility and deposit facility rates were also increased by 25 bps to 6.5 percent and 5 percent, respectively.

“The decision was consistent with efforts to lower the current account deficit to a safe level and to maintain the attractiveness of the domestic financial market as well as to strengthen Indonesia’s external resiliency amid high global uncertainty,” BI Governor Perry Warjiyo told journalists in Jakarta.

In a much-anticipated move, the Fed earlier on Thursday raised its key rate by 25 bps to bring its rate to a target range between 2 percent and 2.25 percent. It was the third hike so far this year, with expectations of another hike in December.

Perry added that the central bank maintained its hawkish stance and would continue to monitor prospects in the global and domestic economies to strengthen its policy response to maintain the stability of financial systems.

Aside from hiking rates, BI also introduced domestic non-deliverable forward (NDF) in a bid to accelerate market deepening in the foreign exchange market. (bbn)

Source: http://www.thejakartapost.com/news/2018/09/27/bi-follows-fed-raises-key-rate-to-5-75-percent.html