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30 May 2018 By Clara Ferreira Marques

Southeast Asia’s largest economy has raised rates for the second time in two weeks. It sends a clear message that the new central bank governor Perry Warjiyo will put a steady currency first. Much of the 25-basis-point hike has been priced in, but timing and tone should reassure.

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Indonesia’s central bank raised its benchmark interest rate by 25 basis points to 4.75 percent after an out-of-cycle meeting on May 30. It is the second time in two weeks that Indonesia has tightened monetary policy, after raising the main rate by 25 basis points on May 17.

Out of 18 analysts surveyed by Reuters, 16 had expected a 25-basis-point increase on May 30.

The rupiah has been one of the worst performing Asian currencies this year, hit by a stronger dollar and rising yields on U.S. Treasuries. Perry Warjiyo, newly sworn in as governor of Bank Indonesia, said on May 24 that he would be “more pre-emptive” and would use interest rates to stabilise the currency.

The rupiah barely moved after the announcement, trading at around 13,985 to the dollar, off lows of 14,210 touched on May 23 and May 24, the weakest level since October 2015.

Bank Indonesia’s next scheduled meeting is June 27 and 28.

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