From Mohd Iswandi Kasan Anuar
JAKARTA, Aug 23 (NNNBernama) — Bank Indonesia (BI) has raised its benchmark interest rate by 25 basis points (bps) to 3.75 per cent from 3.5 per cent for the first time since 2018.
Governor Perry Warjiyo said the preemptive and forward-looking decision would mitigate the risk of rising core inflation and inflation expectations due to the increase in non-subsidised fuel prices and volatile food inflation.
The move is expected to strengthen the rupiah exchange rate stabilisation policy amid high global uncertainty and increasingly strong domestic economic growth, he said in a statement.
BI also raised its overnight deposit and lending facility rate by 25 bps to 3.0 per cent and 4.5 per cent, respectively, amid policy tightening in the United States and a stronger greenback.
The central bank expects inflation to likely accelerate to above 5.0 per cent this year from a previous estimate of between 4.5 per cent and 4.6 per cent.
The hike signalled the start of higher rates this year, according to RHB Bank Bhd, adding that BI will lift its policy rate to 4.0 per cent in the second half of this year and 4.5 per cent in 2023.
“Today’s hike clearly shows policymakers’ increasing concern about higher consumer prices amid a relatively weaker Indonesian rupiah year-to-date,” RHB economist Barnabas Gan said in a note.
After BI’s benchmark interest rate announcement, the rupiah exchange rate traded between banks in Jakarta stood at 14,838 rupiah versus the US dollar
— NNN-BERNAMA
