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Bank Indonesia says another rate hike possible
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Coordinating Economic Minister Darmin Nasution (right) congratulates Bank Indonesia Governor Perry Warjiyo after the latter's inauguration in Jakarta on May 24. (Antara/ Sigid Kurniawan)
B
ank Indonesia (BI) Governor Perry Warjiyo said the latest developments regarding the United States Federal Reserve and European Central Bank (ECB) would be at the top of the agenda at the next BI board of governors meeting.
Perry said at the meeting, which will be held on June 27 and 28, the board will discuss the measures needed to stabilize the country's economy, including increasing its benchmark rate.
"We are open to the possibility of hiking our seven-day reverse repo rate (7DRRR) to ensure the stability of the rupiah and the economy," he said after greeting his guests for Idul Fitri celebrations on Friday.
However, he said the rate hike would be followed by macro-prudential policy relaxation, including easing the loan-to-value (LTV) ratio to help boost economic growth. The LTV relaxation plan is related to the decline of the down payment ratio, mortgage indent regulation relaxation and credit payment terms.
The technical details of the policy, Perry added, would be announced after the meeting.
In May, BI increased its benchmark rate twice in order to stabilize the rupiah's exchange rate against the US dollar. The hikes raised the 7DRRR to 4.75 percent from 4.25 percent.
The Fed raised interest rates on Wednesday and signaled that two additional increases were on the way this year, as officials expressed confidence that the US economy was strong enough for interest rates to rise without choking off economic growth.
Meanwhile, the ECB announced its plan to end quantitative easing by December. It will also stop buying bonds from private companies starting this September. (ris/dmr)
