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Indonesian Central Bank Raises Interest Rates, Rupiah Up

August 29, 2013 at 15:47 by Vladimir Vyun

Rupiah notes and coinsThe Indonesian rupiah advanced today as the nation’s central bank made a surprise move, raising the main interest rate. The Indonesian central bank joined central banks of other emerging economies in an effort to support domestic currency.

The Bank Indonesia boosted its benchmark interest rate by 50 basis points today. The decision was a surprise, not least because the policy meeting was unscheduled. Previously, traders were worried that the central bank is not doing enough to help the depreciating currency and its looks like the bank wants to address the issue.

The Bank Indonesia explained the emergency gathering by necessity “to have an overall evaluation on the condition of Indonesia macroeconomic, monetary and financial system, which recently has been under mounting pressures in line with the increasing global economic uncertainty and prolonged higher inflation expectations and perceptions on the current account sustainability”. Among particularly negative factors the bank mentioned the falling currency and uncertainty about Federal Reserve stimulus tampering.

USD/IDR fell from 10,935 to 10,925 as of 15:47 GMT today. EUR/IDR declined from 14,586.50 to 14,452.50.

If you have any questions, comments, or opinions regarding the Indonesian Rupiah, feel free to post them using the commentary form below.

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