Bank Indonesia surprised markets with another unplanned intermeeting rate hike of 25bps to 5.5%.
The aim was to support the tumbling rupiah as southeast Asian currencies have been getting hammered for a while. It worked, somewhat, as the rupiah slightly appreciated overnight to lead Asian crosses against the dollar.
Still, the policy rate has been raised by 75bps since May 20th (+50bps) including last night’s 25bps move, yet the rupiah has continued to depreciate by about 2% throughout the cumulative hikes. The history of wild-west surprises continues and the rupiah trend shows that further reforms are needed
