Economy Policy

Bank Indonesia raises key rate by 25 bps to 5.5 percent

Bank Indonesia (BI) raised its key rate on Wednesday in a move to maintain the competitiveness of the domestic financial market and to rein in swelling deficit in the current account.

Following a two-day board of governors meeting, the central bank raised its seven-day reverse repo rate by 25 basis points (bps) to 5.5 percent.

The deposit and lending facilities have also been raised by 25 bps to 4.75 and 6.25 percent, respectively.

“The decision was consistent with efforts to maintain the attractiveness of the domestic financial market and to control the current account deficit at a safe level,” BI Governor Perry Warjiyo told the press.

Perry added that the central bank had maintained its hawkish stance, while saying the central bank continued to monitor prospects in the global and domestic economy to strengthen its policy mix response to maintain the stability of financial systems.

BI also noted increasing volatility in the global market with increasing risks that the economic turmoil in Turkey could spread, Perry said, adding that the United States Federal Reserve was also set to continue with its tightening stance.

“BI continues to watch the external risks, including the possibility of spreading the effect from Turkey – although Indonesia’s economic resiliency is believed to be strong, supported by healthy fundamental indicators and strong policy commitments,” he said. (bbn)

The Jakarta Post

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