Indonesia’s central bank raised its benchmark interest rate further on Thursday in a bid to reduce inflation and to ensure the stability of the rupiah.
Bank Indonesia raised its seven-day reverse repo rate by 50 basis points to 4.75%. Six of nine economists polled by The Wall Street Journal had forecast an increase of 50 basis points, while the rest expected a 25-basis-point hike.
The central bank also raised its overnight deposit facility by 50 basis points to 4.00%, and hiked its lending facility by the same amount to 5.50%.
The move to raise rates is aimed at bringing core inflation back to the bank’s target range of 2.0%-4.0% more quickly, Bank Indonesia Gov. Perry Warjiyo said.
The central bank governor said he expects the combination of high inflation and the slowing global economy to weigh on growth in emerging markets this year. Despite this, he expects domestic economic growth to remain healthy, and still projects an expansion of 4.5%-5.3% for 2022.
A rising greenback has caused the rupiah to depreciate, the central bank governor added, noting that the local currency has fallen more than 8.0% against the dollar in the year to date.
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