Bank Indonesia (BI) on Thursday raised its key rate by 50 basis points (bps) to 4.75 percent from 4.25 percent a month earlier.
In addition, the central bank raised the deposit facility rate and lending facility rate by 50 bps to 4.0 percent and 5.5 percent, respectively.
“This decision serves as a front-loaded, pre-emptive, and forward-looking step to reduce the expectation of overshooting inflation,” BI Governor Perry Warjiyo said while announcing the results of the meeting of the central bank’s board of governors, which was accessed online from Jakarta on Thursday.
The decision is also aimed at ensuring that the future core inflation returns to a range of 2–4 percent earlier or by the first half of 2023 as well as at strengthening the policy to stabilize the rupiah’s exchange rate, he added.
That way the rupiah will hopefully trade in line with its fundamentals in view of the US dollar’s strong appreciation and the high level of uncertainty in the global financial market, he explained.
BI is also continuing to strengthen the policy mix to maintain stability and the economic recovery momentum by taking several steps, including strengthening monetary operations and improving the interest rate structure in the money market, in keeping with the key rate hike.
Further, it is strengthening the stability of the rupiah’s exchange rate, continuing to sell or purchase government bonds (SBN) in the secondary market to strengthen the transmission of the key rate hike, and implementing macro prudential and accommodative policies to push the distribution of bank credit/financing to the business world.
Source: Antara News