Indonesia will do whatever it takes to prop up its battered currency and reassure investors that it can control a wide current-account deficit. This, say analysts, is the clear message from a surprise hike in interest rates.
On Tuesday, Bank Indonesia unexpectedly lifted its overnight lending rate by 25 basis points to 7.50 percent. It also increased the overnight deposit facility rate, known as the FASBI, by 25 basis points to 5.75 percent.
(Read more: Indonesia's central bank unexpectedly raises rates)
Since June the central bank has lifted rates by a hefty 175 basis points, taking the key rate to its highest level since 2009.
"It was the right thing to do," HSBC ASEAN Economist Su Sian Lim said in a research note, referring to Tuesday's rate rise.