Indonesia Central Bank Raises Rates for 2nd Straight Month

BI RATE - JAKARTA. Indonesia's central bank increased interest rates by more than expected on Thursday as it sought to control inflation after the government raised fuel prices earlier this month.

Bank Indonesia (BI) raised the 7-day reverse repurchase rate by 50 basis points to 4.25%. Out of 30 economists polled by Reuters, 27 had expected a 25 basis point move, while the remaining three had bet on a bigger 50 basis point rate hike.

The bank also hiked the overnight deposit facility and lending facility rates by the same amount to 3.50% and 5.00%, respectively.

The rate decision comes after the government raised fuel prices by about 30% earlier this month.

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In August, Indonesia's central bank raised rates for the first time since 2018 as inflation hovered near its highest levels in seven years.

The inflation rate eased more than expected in August, but, at 4.69%, it was above BI's 2% to 4% target range for a third straight month.

Some economists predicted the fuel price hike will push inflation up to around 6% by the end of this year.