Bank Indonesia hikes rate to 6 percent

Photo : Reuters


Bank Indonesia on Thursday raised its policy rate to maintain the attractiveness of Indonesian assets.

Following its two-day board of governors meeting, the central bank decided to hike its seven-day reverse repo rate by 25 basis points (bps) to 6 percent, while the lending and deposit facilities were increased by the same amount to 6.75 percent and 5.25 percent, respectively.

With the latest move, BI has raised its key rate six times since May, raising it by a total 175 bps as part of efforts by monetary authorities to stabilize the rupiah amid high volatility in the global market.

BI Governor Perry Warjiyo said the move was consistent with the central bank’s joint effort with the government to reduce the current account deficit.

He added that the latest hike would strengthen Indonesian assets in anticipation of near-term global interest rate increases. “The decision was part of BI’s further steps to strengthen the effort to lower the current account deficit to a safe level,” said Perry in Jakarta on Thursday.

BI also relaxed the macroprudential liquidity buffer (PLM) rule, allowing banks to sell 4 percent of their owned securities to BI through a repurchase agreement (repo) instead of the previous 2 percent.

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