Indonesia surprises market with rate increase

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central-Bank-IndonesiaIndonesia’s central bank on November 12 unexpectedly raised its benchmark interest to 7.5 per cent, according to an emailed statement by the bank.

Governor Agus Martowardojo and his board increased the reference rate by 25 basis points, more than economists expected.

Indonesian officials are grappling with a depreciated exchange rate, elevated inflation and diminished foreign capital inflows undermining President Susilo Bambang Yudhoyono’s legacy of economic stability before he steps down next year.

With the rate increase, the central bank has raised its key rate by 1.75 percentage points since early June 2013 to shore up the rupiah and stem price gains, while the government predicts 2014 growth will be slower as it reins in spending to narrow a record current-account gap.

The rupiah was little changed on November 12. It has declined more than 17 per cent this year, the worst performance among 11 major Asian currencies.

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Reading Time: 1 minute

Indonesia’s central bank on November 12 unexpectedly raised its benchmark interest to 7.5 per cent, according to an emailed statement by the bank.

Reading Time: 1 minute

central-Bank-IndonesiaIndonesia’s central bank on November 12 unexpectedly raised its benchmark interest to 7.5 per cent, according to an emailed statement by the bank.

Governor Agus Martowardojo and his board increased the reference rate by 25 basis points, more than economists expected.

Indonesian officials are grappling with a depreciated exchange rate, elevated inflation and diminished foreign capital inflows undermining President Susilo Bambang Yudhoyono’s legacy of economic stability before he steps down next year.

With the rate increase, the central bank has raised its key rate by 1.75 percentage points since early June 2013 to shore up the rupiah and stem price gains, while the government predicts 2014 growth will be slower as it reins in spending to narrow a record current-account gap.

The rupiah was little changed on November 12. It has declined more than 17 per cent this year, the worst performance among 11 major Asian currencies.

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