Indonesia central bank governor sees no need for further rate hike

Bank Indonesia’s governor Perry Warjiyo on Monday (Jun 24) said he saw no need for further rate hikes at the moment, even after the rupiah fell to its weakest since 2020 against the dollar last week, partly due to increasing uncertainties in global markets.

Warjiyo told a meeting with parliament’s financial committee the rupiah was also under pressure due to domestic US dollar demand for dividend repatriation to offshore shareholders, and market perceptions on fiscal risks amid Indonesia’s change of president later in the year.

“At this moment there is no need to raise BI (benchmark) rate,” he said, adding foreign exchange intervention and the use of rupiah-denominated certificates known as SRBI were enough as inflation would stay low until the end of the year.

“Also, this is so there is no negative impact on economic growth,” Warjiyo added.

The governor told lawmakers that geopolitical conflicts and weather disrupting supply chains, higher-for-longer interest rate policy in the US as well as Washington’s debt plans, continued to heighten global uncertainties.

Bank Indonesia (BI) last week held its benchmark policy rate unchanged and said it would fine-tune other tools to stabilise the rupiah, which it said would return to a strengthening trend once global uncertainties subside.

Warjiyo said BI last week sold a large volume of SRBI to attract portfolio inflows, aiming to use this to complement its currency intervention in steadying the rupiah.

The central bank would continue to work based on its mandate to keep the rupiah stable with all the tools available to monetary policymakers, including, if necessary, by raising interest rates, Warjiyo said.

In April, BI raised interest rates in a surprise move in response to a fall in the rupiah due to changing expectations for the start and magnitude of monetary easing in the United States. REUTERS