Indonesia central bank unexpectedly raises rates amid falling rupiah
© Reuters. FILE PHOTO: The logo of Indonesia's central bank, Bank Indonesia, is seen on a window in the bank's lobby in Jakarta, Indonesia September 22, 2016.REUTERS/Iqro Rinaldi/File PhotoJAKARTA - Bank Indonesia unexpectedly raised interest rates on Thursday to arrest the rupiah's decline amid U.S. monetary tightening and rising geopolitical risks, with economists seeing possible further hikes should the currency's weakness persist.
"This increase is to strengthen stabilisation measures for the rupiah against the impact of increasing global uncertainty, and as a pre-emptive and forward-looking step to mitigate its impact on inflation through imported goods," Governor Perry Warjiyo said. Wary of Indonesia's large stock of foreign currency debt, analysts have said the rupiah's weakness is holding BI back from cutting interest rates, even as inflation cooled to a 19-month low in September, near the lower end of BI's 2% to 4% target range for 2023.