JAKARTA: Indonesia’s central bank unexpectedly raised its key interest rate yesterday to rein in a widening current account deficit blamed for exacerbating recent turmoil in Southeast Asia’s top economy.
It also came as emerging markets were under fresh pressure amid renewed speculation the US may begin rolling back its stimulus programme soon following better than expected growth data.
The decision to raise the key rate by 25 basis points to 7.5 percent came as a surprise, with most economists expecting the central bank to keep rates on hold.
Bank Indonesia has now increased rates by 175 basis points since June as it tries to protect the economy, which has come under pressure from both internal and external factors in recent months. Fears the US was set to taper off its huge stimulus programme led to outflows of foreign capital from emerging markets, with Indonesia’s market stock index and the rupiah suffering heavy losses. AFP
