Indonesia: BI Increases Reference Rate

• Mar 13, 2017

TEMPO.CO, Jakarta – Bank Indonesia (BI) plans to increase its 7-day reverse repo benchmark rate by over 25 basis points (bps). DBS Bank research group economist Gundy Cahyadi told Antara on Sunday, March 12, 2017, that The Federal Reserve’s plan to increase interest rates this month may trigger Bank Indonesia to follow suit.

Considering current condition, Gundy predicts that BI would increase benchmark interest rate in the third quarter of 2017.

“BI may turn more aggressive if inflation rate accelerated faster or rupiah weakens more than expected,” Gundy said.

As for BI’s monetary policies in March 2017, DBS expects the 7-day reverse repo rate to be kept at 4.75 percent, or unchanged for the sixth consecutive month. “Suppressing the rupiah exchange rate volatility is still BI’s priority which particularly drives the growth of domestic investment,” he said.

According to Gundy, Indonesia’s foreign exchange reserves of USD119.9 billion may help BI to suppress exchange rate volatility amid possible capital outflow.

Source: https://en.tempo.co/read/news/2017/03/13/056855284/BI-Increases-Reference-Rate