Indonesia’s central bank has unexpectedly raised its benchmark interest rate to prop up the rupiah which is trading at record lows, as a sell-off rocks assets across south-east Asia’s largest economy.
Bank Indonesia increased the rate by 0.25 percentage points on Tuesday to 5.50 per cent in an off-cycle move. This followed a 0.50 percentage point rise just three weeks ago in what was its first rate increase in two years.
In a statement, the central bank said it was necessary “to take further steps to strengthen the stabilisation of [the] rupiah exchange rate by increasing yields and a number of other incentives to encourage the inflow of foreign investment”. The bank said the currency was performing “worse than expected” in the three weeks since its previous rate rise.