Indonesia hikes rates again to reverse rupiah slump

Agence France-Presse

Posted at May 30 2018 06:23 PM

JAKARTA - Indonesia's central bank hiked its key interest rate Wednesday for the second time this month to prop up the rupiah after it slumped to its lowest level in three years.

Policymakers at Bank Indonesia hiked rates to 4.75 percent from 4.50 percent, following a similar rise from 4.25 percent in mid-May.

The rupiah slid by some four percent from the start of the year to fall below 14,000 against the dollar, its weakest level since 2015.

The two rate hikes this month -- the first since 2014 -- underscore concerns about emerging market currencies, including the rupiah, as rising US interest rates lure investors to dollar-denominated assets.

"Generally our economy is quite solid but there is global pressure that needs an immediate response," newly-inaugurated Bank Indonesia governor Perry Warjiyo told reporters after a meeting.

He also left the door open to more rate hikes.

While the latest move may offer respite to the depreciating currency, it could stifle efforts to boost sluggish growth rates.

In a bid to rev up Southeast Asia's biggest economy, the central bank had been repeatedly slashing rates over the past year and a half until it reversed course with this month's hikes.

Indonesian President Joko Widodo came to power in 2014 on a pledge to boost annual growth to seven percent, but the commodities-driven economy has remained stuck in the 5.0 percent range.