Indonesia central bank hikes key rate by 50 basis points to 5.25%

  • The rate was twice what the market expected.
Dimas Ardian | Bloomberg | Getty Images

Indonesia's central bank on Friday raised its policy interest rate by 50 basis points (bps), twice what the market expected, as it stepped up efforts to stabilize the volatile rupiah.

Bank Indonesia (BI) hiked the seven-day reverse repo rate to 5.25 percent. It is the third rate hike in six weeks.

Seventeen out of 23 economists polled by Reuters had predicted a 25 bps hike on Friday. The other six forecast a hold.

BI's deposit and lending facility rates were also raised by 50 bps, to 4.50 percent and 6.00 percent respectively.

Increasing the key rate is aimed at shoring up the rupiah, which has weakened this month despite the two rate hikes in May as emerging markets struggle with capital outflows.

This year, the rupiah has lost more than 5 percent against the dollar.

BI raised rates at its monthly meeting on May 17 and an extra meeting called on May 31.

Seventeen out of 23 economist polled by Reuters had predicted a hike.

BI's deposit and lending facility rates were also kept steady, at 4.00 percent and 5.50 percent, respectively.

Governor Perry Warjiyo said earlier this month that the central bank was ready to respond to the Federal Reserve's mid-June U.S. interest rate hike with one of its own.