By CentralBankNews.info
Indonesia’s central bank will hold “an additional” monthly meeting of its governors on May 30, igniting speculation that it will raise its key interest rates for the second time this month.
Bank Indonesia (BI) said in a brief statement on Friday the additional meeting of its board of governors (RDG) would not replace the regular monthly meeting, which is scheduled for June 28.
“This additional monthly RDG will discuss current economic and monetary conditions and future prospects,” BI said.
On May 17 BI raised its benchmark BI 7-day reverse repo rate by 25 basis points to 4.50 percent its first rate hike since November 2014, “amid the escalating risks in the global financial market and global liquidity downturn.” BI’s other key rates, the deposit and lending facility rates, were also raised by 25 points.
BI added on that day that it was “ready to implement stronger measures to maintain macroeconomic stability” and the governor subsequently said he was prepared to raise rates further.
Since that board meeting, Perry Wariyo has taken over as governor after Agus Martowardojo’s 5-year term expired.
At the press conference in connection with his inauguration on May 24, Wariyo said his priority in the short term was to stabilize the rupiah through interest rates, adding he intended to be more pre-emptive in monetary settings.
So far BI’s main instruments in curbing the rupiah’s decline has been raising interest rates combined with the sales of U.S. dollars and the purchase of government bonds from foreign sellers.
Last week BI also conducted three foreign exchange swap auctions to ensure enough rupiah liquidity following the rate hike and currency market interventions, up from two the previous week and one each week in April.
Immediately following last weeks’ rate hike, the rupiah continued to slide to hit 14,210 on Thursday to the dollar, down 4.5 percent since the start of the year.
But news on Friday of the unscheduled board meeting led to a bounce in the rupiah, which rose to 14,037 per dollar late that day, down 3.3 percent this year.
Indonesia’s economy has slowed in the last two quarters, with annual growth in the second quarter of 5.06 percent. In its last statement, BI forecast growth this year of 5.1-5.5 percent and in his press conference Warjiyo forecast growth of 5.2 percent.
He also forecast inflation near the midpoint of the central bank’s target range of 3.5 percent, plus/minus 1 percentage point.
In April Indonesia’s inflation rate was steady from March at 3.4 percent.