Indonesia lifts BI rate by 25 bps to 7¼%, aims to bolster policy mix

By Susanna Moon

Chicago, Sept. 12 - Bank Indonesia's board of governors again opted to raise the BI rate, this time by 25 basis points to 7¼% at its meeting on Thursday, according to a bank notice.

The move comes on the heels of a hike of 50 bps to 7% last month on Aug. 29.

The rate bump is part of the follow-up effort "to reinforce the policy mix instituted by Bank Indonesia, which focuses on controlling inflation, stabilizing the rupiah exchange rate and ensuring the current account deficit is managed to a sustainable level," according to a bank notice.

The bank said it forecasts lingering global economic sluggishness and financial uncertainty.

As for inflation, the rate was 1.12% month to month in August or 8.79% year over year, plummeting from the previous month at 3.29% or 8.61%, respectively.

The bank said inflationary pressures will continue to ease, with a low level of inflation expected in September.

This month, the board also raised the lending facility rate by 25 bps to 7¼% and the deposit facility rate by 25 bps to 5½%.

The board said on Aug. 15 that it decided to keep the BI rate at 6½%. Before the most recent rate hike, the bank last changed the BI rate in July, increasing it by 50 bps from 6%.

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