Jakarta. Bank Indonesia hiked the benchmark interest rate by 50 points to 4.25 percent on Thursday to help ease pressures from the rising inflation weeks after the government raised the price of subsidized fuel products.
The move came a month after the central bank also raised the benchmark rate by 25 basis points.
Central Bank Governor Perry Warjiyo said the hike was decided as “preventive and forward-looking measures” against surging inflation and to keep the CPI from spiraling beyond the initial target of 3 percent by the end of the year.
"It also aims to strengthen policies on stabilizing the exchange rate of the rupiah in the face of the highly volatile global financial market as the domestic economic growth is increasingly gaining grounds,” Perry said.
Significant growth in private consumption post-Covid-19 pandemic restrictions will spur the economic growth to a projected 5.5 percent this quarter, he added.
“The consumption by the private sector enjoys a rapid growth due to an increase in income, financing availability, and stronger consumers’ confidence spurred by increasing people’s mobility,” he said.
According to the latest Bank Indonesia survey, several key indicators like consumers’ confidence, retail sales, and the purchasing managers' index have shown a very strong post-pandemic rebound, the central bank chief said without going into details.
Export sales are increasing because of growing global demands for certain commodities like crude palm oil, coals, iron, and steel, he said.
The central bank has predicted that the annual economic growth will reach between 4.5 percent and 5.3 percent this year.