Jakarta. Bank Indonesia kept its benchmark interest rate steady for the sixth straight month on Tuesday, and announced efforts to tighten controls on dollar purchases in a bid to ease rupiah volatility.

The central bank maintained its key rate at 7.5 percent with the overnight deposit facility and lending facility rate at 5.5 percent and 8 percent, respectively, noting that inflation would subside toward the end of the year to between 3 and 5 percent, from 7.26 percent in July.

“The board of governors’ meeting has decided to maintain the rate,” BI Governor Agus Martowardojo told reporters in Jakarta on Tuesday. “In the short term, our policy focus is to guard the rupiah’s stability.”

Agus said the central bank would now require underlying documents for the purchase of a minimum of $25,000, down from the previous $100,000, to stabilize the rupiah by limiting speculative transactions using the greenback.

The rupiah declined 0.5 percent to trade at 13,831 against the dollar on Tuesday.

The local currency has lost 2.2 percent of its value against the dollar in the past week, in line with other currencies in Asia, following China’s surprise move to devalue the yuan.

“We are not only worried, we have been defending the rupiah desperately,” Perry Warjiyo, a deputy BI governor, said as quoted by Reuters. He said the central bank was staying active in the foreign exchange and bond markets.

The country has $107 billion in foreign reserves to meet market demand for dollars for imports and debt payments. The government and local companies need dollars to pay back more than $45 billion in debt due in less than a year, according to BI data.

Lana Soelistianingsih, an economist at the University of Indonesia, said holding the rate was the best way to balance between managing pressure on the rupiah and allowing the economy to grow.

Eric Sugandi, an economist at Standard Chartered Bank, agreed that there was need to rush to raise the rate immediately, but recommended a 25 basis point hike to 7.75 percent in September, when the US Federal Reserve is widely expected to increase its key rate.

GlobeAsia & Reuters