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Bank Indonesia rate hike appropriate: IMF
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The International Monetary Fund (IMF) building sign is viewed on April 5, 2016 in Washington, DC. (AFP/Karen Bleier)
T
he International Monetary Fund (IMF) has described Bank Indonesia’s (BI) move to increase its seven-day reverse repo rate as “appropriate”.
IMF director of Asia and Pacific department Changyong Rhee said the policy rate increases, made on May 17, in which BI increased the policy rate by 25 basis points to 4.50 percent, and another on May 30 to 4.75, were appropriate.
“Bank Indonesia’s increases in the policy rate on May 17 and May 30 were appropriate to address possible risks to inflation from the recent strengthening of the US dollar globally, higher international interest rates and oil prices,” he said in a statement made available to The Jakarta Post on Wednesday.
The central bank raised its policy rate to 4.75 percent during an additional BI board of governors meeting held on Wednesday. The move was seen as an attempt to ensure stability against volatility that is expected to increase on the back of the United States Federal Reserve’s planned interest rate hike in mid June.
Rhee went on to say that Indonesia had been facing capital outflows and depreciation pressure in recent weeks, just like many other emerging market economies. Thus, allowing interest rates and the exchange rate to adjust were an appropriate response.
“While the current situation calls for enhanced vigilance and close monitoring, Indonesia is now in a much stronger position than in the past to face external shocks due to the health and resilience of the economy,” he said. (dwa)
