Bank Indonesia says another rate hike possible

  • Bank Indonesia (BI) Governor Perry Warjiyo said the latest developments regarding the United States Federal Reserve and European Central Bank (ECB) would be at the top of the agenda at the next BI board of governors meeting.
  • Perry said at the meeting, which will be held on 27-28 Jun 18, the board will discuss the measures needed to stabilize the country’s economy, including increasing its benchmark rate.
  • However, he said the rate hike would be followed by macro-prudential policy relaxation, including easing the loan-to-value (LTV) ratio to help boost economic growth. The LTV relaxation plan is related to the decline of the down payment ratio, mortgage indent regulation relaxation and credit payment terms. The technical details of the policy, Perry added, would be announced after the meeting.
  • In May 18, BI increased its benchmark rate twice in order to stabilize the rupiah’s exchange rate against the US dollar. The hikes raised the 7DRRR to 4.75% from 4.25%.
  • The Fed raised interest rates on 13 Jun 18 and signalled that two additional increases were on the way in 2018, as officials expressed confidence that the US economy was strong enough for interest rates to rise without choking off economic growth.
  • Meanwhile, the ECB announced its plan to end quantitative easing by Dec 18. It will also stop buying bonds from private companies starting Sep 18.

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