Bank Indonesia lifts rate to stabilise currency: More to come?

May 18, 2018

JAKARTA - Bank Indonesia (BI) has shifted its policy focus to ensure exchange rate stability by raising its 7-day policy repo rate by 25bps to 4.50%.

The increase comes at a time when inflation is firmly nestled in BI’s target band of 2.5-4.5% and GDP growth lingers in a narrow range of 5-5.5%.

In a research note, ANZ Bank says it believes a single rate hike will not be sufficient to stabilise recent volatility in the IDR.

“Accordingly, we are now pencilling in two further hikes of 25bps each in June and September respectively,” ANZ says. “These rate hikes are likely to adversely impact growth prospects, in our view.”

www.live.anz.com (ATI).