Indonesia central bank raises benchmark rate by 50 basis points to 7%

Sha Ying | CNBC

Indonesia's central bank raised its benchmark reference rate 50 basis points to 7.0 percent on Thursday in a bid to stabilize the wilting rupiah and economy as the country battles high inflation and a stock market sell-off.

It also raised its overnight deposit facility rate, FASBI, 50 bps to 5.25 percent and its lending facility rate by 25 bps to 7.0 percent.

Bank Indonesia (BI) held rates steady at a board meeting on Aug. 15, and its next monthly meeting had not been scheduled until Sept. 12. But declines in the rupiah and local stocks began to accelerate over the last week, prompting the Thursday session.

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In June and July, BI raised the reference rate by a total of 75 basis points, to 6.50 percent.

BI has been under pressure to raise rates again, as the rupiah has tumbled to more than four year lows and has been Asia's second worst-performing this year after the Indian rupee.

Among investors, confidence in the rupiah and Indonesia has been battered by concerns over a wide current-account deficit and a spike in inflation, which hit 8.61 percent in July.

The statistics bureau is expected to release August inflation data on Monday. BI has estimated that August's annual rate would be above 8.9 percent.

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