Bank Indonesia Sees No Urgent Need for Rate Hikes to Aid Rupiah
(Bloomberg) -- Bank Indonesia sees no immediate need to raise interest rates further while reiterating its preference for using market intervention to stabilize the rupiah.
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“We currently see no need to increase the BI rate yet because inflation is low. This is also so that it doesn’t impact economic growth negatively,” said Governor Perry Warjiyo at a parliament hearing on Monday.
“We will maintain the stability of the rupiah exchange rate with three instruments: interventions, SRBI instruments and — if necessary — an increase in the BI rate,” he added, adding that the monetary authority remained confident the rupiah would return to its fundamental value of stronger than 16,000 a dollar.
Warjiyo’s comment reinforces BI’s stance in keeping rate hikes as a last resort to bolster the rupiah, especially as inflation remains well within its target of 1.5%-3.5% and the economy is expected to grow 4.7%-5.5% this year. That’s far short of President-elect Prabowo Subianto’s goal of boosting economic expansion to 8% during his term.
The rupiah has been trading near a four-year low due to high corporate dollar demand and investors’ concern over the incoming government’s fiscal policies. The currency gained 0.1% on Monday to 16,430 a dollar as of 1:24 p.m. in Jakarta.
--With assistance from Claire Jiao.
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