To Protect the Rupiah, BI Raises Benchmark Interest Rate by 25 bps

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16/11/2018 10:10 WIB

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This is the sixth increase, totaling 175 basis points this year.

BI 7-Day Reverse Repo Rate (Jan-Nov 2018)

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To Protect the Rupiah, BI Raises Benchmark Interest Rate by 25 bps

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BI 7-Day Reverse Repo Rate (Jan-Nov 2018)

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Bank Indonesia raised its benchmark interest rate, the BI 7-day Reserve Repo Rate, by 25 basis points to 6% on November 15, 2018. This is the sixth increase this year, totaling 175 basis points.

Global uncertainty stemming from the US interest rate hike, the threat of a trade war, and Indonesia's trade deficit caused the rupiah to plummet to over Rp 15,000 per US dollar. This perceived risk led to foreign capital outflows from the domestic financial market, with investors shifting to safer US dollar assets, triggering the rupiah's decline to its lowest level in 20 years this year.

To prevent further rupiah depreciation, Bank Indonesia raised its benchmark interest rate to maintain the attractiveness of domestic financial market investments. However, the central bank must also manage the interest rate increase to ensure continued real sector growth. Furthermore, considering the ongoing global financial crisis, the central bank needs to conserve its ammunition to withstand global pressures. At the end of this week's trading, the rupiah was traded at Rp 14,602 per US dollar.

"Disclosure: This is an AI-generated translation of the original article. We strive for accuracy, but please note that automated translations may contain errors or slight inconsistencies."