- BI increase its policy rate by another 25 bps to 5.50%, citing inflation risks and the weaker-than-expected Rupiah as the reason.
- The central bank has signalled that it will tolerate higher yields to attract inflows, although the strengthened repo facility and higher remuneration on the government’s cash reserves will continue to stimulate liquidity growth.
- More rate hikes might still be needed to compensate investors, given the fundamental risk that continues to loom over the Rupiah.
