JAKARTA: Indonesia's central bank raised its policy interest rates for the first time in two years at a policy review on Wednesday, as it works to support the rupiah currency which has fallen to a series of record lows in recent days.
Bank Indonesia (BI) hiked its benchmark 7-day reverse repurchase rate by 50 basis points to 5.25%.
Sixteen of 29 economists in a Reuters survey had expected a 25-basis-point increase, while the rest had expected no change.
BI also raised its overnight deposit facility and lending facility rates by the same amount, to 4.25% and 6.00%, respectively.
"The increase is a further step to strengthen the stabilisation of the rupiah exchange rate amid global volatility due to the Middle East war, as well as a pre-emptive measure to keep inflation within the target range in 2026 and 2027," Governor Perry Warjiyo said in an online press conference.
The rupiah has repeatedly set new record lows recently with investor concerns about the economic fallout from the Iran war compounding unease over Jakarta's spending plans, the independence of its central bank and transparency in the capital markets.
The rupiah hit a record low of 17,745 per dollar in morning trade on Wednesday. It was trading at around 17,600 per dollar soon after the BI decision, and has fallen by about 6% against the U.S. dollar so far this year to rank among the worst performing currencies in emerging Asia. - Reuters
