Indonesia’s central bank today raised its key interest rate. This is the fifth rate hike since August in an effort to bring inflation back to target levels next year.
Bank Indonesia (BI) raised its 7-day repo rate by 0.25% to 5.50%, in line with economists’ expectations.
Inflation in Indonesia, Southeast Asia’s largest economy, rose to a seven-year high of 5.95% in September after the government increased fuel subsidies earlier this month. The rupiah has weakened slightly after falling about 9% against the dollar this year, with the U.S. currency supported by tighter Federal Reserve monetary policy.
The governor of Bank Indonesia said that the rupiah will appreciate next year. Global financial markets are expected to become less volatile as major central banks end fiscal tightening.