Bank Indonesia increased interest rates by 25 bps during the last meeting of 2022, a fifth consecutive hike, on Thursday as it sought to tame inflation and strengthen the rupiah exchange rate. The benchmark 7-day reverse repurchase rate now stands at 5.5%, the deposit facility at 4.75% and the lending facility at 6.25%, their highest level since 2009 and in line with market forecasts. So far in 2022, the central bank has lifted rates by 200bps.
Indonesia’s annual inflation rate fell to a three-month low of 5.42% in November and is expected to hold around 5.4% in December and come down to 3% at the end of 2023. The rate had accelerated to 5.95% in September 2022, marking the fastest rise in consumer prices since October 2015.
Headline and core inflation remain elevated and above the bank’s target 2–4% range for the fifth straight month.
Indonesia’s central bank, BI sought to rein in inflation after the government raised subsidized fuel prices earlier in August, while also supporting the rupiah currency.
Policymakers noted that the economy was in a good position, supported by increased private consumption and continued strength in exports.
Inflation is the Issue
From The TradersCommunity Research Desk