Mitigating the Fall of Rupiah, BI Aggressively Raises Interest

The increase in the Fed's interest rates and the increasing uncertainty in the global economy have encouraged the strengthening of the US dollar against other currencies.

KOMPAS/ELSA EMIRIA LEBA

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JAKARTA, KOMPAS — The continual fall in the rupiah exchange rate against the US dollar coupled with inflation expectations, which are still high, prompted Bank Indonesia (BI) to aggressively raise its benchmark interest rate again by 50 basis points (bp) to 4.75 percent. The increase in the benchmark interest rate is expected to maintain the stability of the rupiah exchange rate as well as return inflation to the 2-4 percent target in semester I-2023.

The policy was decided at the Meeting of the Board of Governors (RDG) of Bank Indonesia which was held on Thursday (20/10/2022). This is an increase of 50 basis points in a row after BI did the same thing in the previous month. Meanwhile, in August 2022, BI raised interest rates only by 25 bp.