Increased five times, the BI 7-day interest rate at 5.75%

The Bank Indonesia (BI) Board of Governors (RDG) meeting held on September 26-27, 2018, decided to raise the 7-Day Reverse Repo Rate (BI7DRR) by 25 basis points to 5.75%. This is the fifth increase, totaling 125 basis points, since the BI7DRR was implemented as the central bank's benchmark interest rate in August 2016. This RDG decision is in line with the outcome of the US Federal Reserve (The Fed) FOMC meeting, which earlier raised the Fed Funds rate by 25 basis points to 2.25%.

According to BI's release, this step is consistent with efforts to reduce the current account deficit to a safe level and maintain the attractiveness of the domestic financial market. This will further strengthen Indonesia's external resilience amid persistent global uncertainty.

The BI7DRR rate hike was in line with analysts' predictions and was positively received by domestic stock market investors. This is reflected in the Jakarta Composite Index (IHSG) of the Indonesia Stock Exchange, which moved positively from the start of trading. At the end of the trading session on Thursday (September 27), the IHSG closed up 55.945 points (0.95%) to 5,929.216 from the previous day's close. Meanwhile, the rupiah exchange rate, based on Bloomberg data, closed down 0.08% to Rp 14,923 per US dollar.