Indonesia hikes rates for second straight month to stem inflation

Indonesia hikes rates for second straight month to stem inflation

JAKARTA: Indonesia’s main bank hiked the key interest rate for your second month within a row Thursday (Sep 22) to combat rising inflation stoked by fuel prices and the war within Ukraine.

Bank Indonesia forced the policy rate to 4. twenty five from 3. 75 per cent, and the jump was higher than expected by analysts.

Its two some other main rates were also raised by 50 basis factors.

The main bank hiked rates of interest in August the first time since 2018 to protect against accelerating inflation, with Russia’s attack of Ukraine driving up global power and food costs and pushing large numbers into poverty.

But a gas price rise this particular month has place more pressure within the central bank to behave.

The government raised heavily subsidised fuel prices by about 30 per cent, a policy anticipated to further stoke inflation already at four. 69 per cent.

Some analysts have forecast inflation achieving as high as seven per cent by the end of the season.

Thurday’s price hike was a “frontloaded, pre-emptive and forward-looking” move aimed at “lowering inflation expectation”, Financial institution Indonesia Governor Perry Warjiyo said.

It sought to create down core pumpiing to within the main bank’s target of between 2 and 4 per cent within the second half of next year, he said, forecasting it could rise in order to nearly 6 percent this month.

President Joko Widodo came to power within 2014 on a pledge to boost annual growth to 7 %.

The commodities-driven economy has continued to be stuck around 5 per cent, however , and has fallen below that after the onset from the coronavirus pandemic in early 2020.

The outlook for financial policy is likely a lot more tightening as the authorities tries to get a greater handle on inflation, economists said.

“While a rate walk today was certainly not in doubt, the size of the particular increase was, ” said Gareth Natural leather, Asia economist from Capital Economics.

“With inflation started jump sharply increased in September plus remain well above target until late 2023, further tightening is likely. ”