Overview
- Bank Indonesia raised its benchmark 7-day reverse repo rate to 5.25% on Wednesday in a surprise 50 basis-point move.
- It also increased the overnight deposit and lending facility rates to 4.25% and 6.00% to reinforce the stance.
- Governor Perry Warjiyo said the step aims to steady the rupiah after it hit a record 17,745 per dollar and to head off future inflation.
- The bank will keep liquidity ample and continue currency-market operations after foreign reserves fell about $10 billion in the year to April from earlier interventions.
- Warjiyo cited strong dollar demand from dividend repatriation, foreign-debt payments, and hajj travel, while analysts said any further hikes would hinge on the rupiah rather than start a long tightening cycle.