Bank Indonesia raised its key interest rate more than economists forecast to bolster a weakening currency and ease inflation pressures after the government increased fuel prices.
The central bank boosted the reference rate by 50 basis points to 6.5 percent. The outcome was predicted by three of 19 economists surveyed by Bloomberg News, with the majority expecting a 25 basis-point increase. It also raised the deposit facility rate to 4.75 percent from 4.25 percent.
Indonesia in June became the region’s first major economy to boost rates in 2013, and the back-to-back increase may bolster confidence in the rupiah as the central bank tries to shore up one of Asia’s worst performing currencies. Price gains are expected to peak in July.
Bank Indonesia is also aiming to take some of the pressure off the rupiah. The sharp fuel-price rise and associated interest-rate tightening measures, which may well not have finished yet, is coming at a time when the economy is softening.”
The rupiah was little changed at 9,973 per dollar as of 4:25 p.m. in Jakarta, prices compiled by Bloomberg from local banks show. It has fallen about 6 percent in the past 12 months, the worst performer among 11 Asian currencies after the yen and the Indian rupee.
The central bank boosted the reference rate by 50 basis points to 6.5 percent. The outcome was predicted by three of 19 economists surveyed by Bloomberg News, with the majority expecting a 25 basis-point increase. It also raised the deposit facility rate to 4.75 percent from 4.25 percent.
Indonesia in June became the region’s first major economy to boost rates in 2013, and the back-to-back increase may bolster confidence in the rupiah as the central bank tries to shore up one of Asia’s worst performing currencies. Price gains are expected to peak in July.
Bank Indonesia is also aiming to take some of the pressure off the rupiah. The sharp fuel-price rise and associated interest-rate tightening measures, which may well not have finished yet, is coming at a time when the economy is softening.”
The rupiah was little changed at 9,973 per dollar as of 4:25 p.m. in Jakarta, prices compiled by Bloomberg from local banks show. It has fallen about 6 percent in the past 12 months, the worst performer among 11 Asian currencies after the yen and the Indian rupee.
Indonesia’s foreign-exchange reserves fell to $98.1 billion from $105.15 billion in May 2013, the central bank said as it intervened. The levels are still adequate to stabilize the currency, Martowardojo said last week.
President Susilo Bambang Yudhoyono last month raised domestic fuel prices for the first time since 2008 to cut subsidy costs and boost confidence in the rupiah. Consumer prices rose 5.9 percent in June from a year earlier, from 5.47 percent in May.
The central bank raised the benchmark rate by half a percentage point because it sees price gains approaching the upper end of its 7.2 percent-to-7.8 percent range for 2013 and as transportation costs rose “too steeply” after the fuel subsidy cuts, Martowardojo said today. Before the fuel price increase, it had expected inflation to be between 3.5 percent and 5.5 percent.
President Susilo Bambang Yudhoyono last month raised domestic fuel prices for the first time since 2008 to cut subsidy costs and boost confidence in the rupiah. Consumer prices rose 5.9 percent in June from a year earlier, from 5.47 percent in May.
The central bank raised the benchmark rate by half a percentage point because it sees price gains approaching the upper end of its 7.2 percent-to-7.8 percent range for 2013 and as transportation costs rose “too steeply” after the fuel subsidy cuts, Martowardojo said today. Before the fuel price increase, it had expected inflation to be between 3.5 percent and 5.5 percent.
