Bank Indonesia raised its overnight deposit rate and announced cuts to banks’ reserve requirements on Oct. 21 while holding its 5.75% benchmark rate, seeking to support the rupiah and lending.
The central bank increased its Deposit Facility rate by 25 basis points to 5.00% and kept its Lending Facility rate at 6.50%. Its benchmark BI-Rate has stayed at 5.75% through four monthly reviews since an increase in June.
Bloomberg Technoz reported that the rupiah finished Jakarta trading at Rp18,005 per U.S. dollar, a 0.1% decline. FXStreet quoted about Rp18,040 per dollar in a report earlier in the day.
Bank Indonesia’s Jakarta Interbank Spot Dollar Rate (JISDOR) gave a different reading: Rp17,986 per dollar on Oct. 21, down from Rp18,006 on Oct. 20. The lower dollar rate indicates a stronger rupiah on that measure. JISDOR draws on interbank transactions during the Jakarta trading session and is distinct from a market closing quote.
The bank identified several pressures on the currency, including changes in foreign investors’ appetite for Indonesian stocks, tighter U.S. monetary policy and tensions in the Middle East. Indonesia’s September consumer inflation was 3.28% from a year earlier, within the bank’s target of 2.5% plus or minus 1 percentage point.
The hold followed a split in rate expectations before the meeting. In a Reuters poll, 15 of 29 economists expected no change, while the other 14 forecast an increase of at least 25 basis points.
Bank Indonesia said it would reduce reserve requirements for conventional commercial banks from 9% to 8% on Nov. 1 and then to 7% on Dec. 1. The cuts are intended to increase bank liquidity and support lending. The bank also expanded incentives for qualifying Domestic Non-Deliverable Forward hedges as part of its currency support measures.
Bank Indonesia’s next Board of Governors meeting is scheduled for Nov. 17-18.
