JAKARTA - Bank Indonesia (BI) has decided to increase the benchmark interest rate by 50 basis points (bps) to 4.25 percent.

BI Governor Perry Warjiyo said a similar increase also occurred in the interest rate of deposit facilities of 50 bps to 3.50 percent and the lending facility rate of 50 bps to 5 percent.

"The decision to increase the interest rate is a pre-emptive, and forward looking step to reduce inflation expectations and ensure core inflation returns to its target of 3 percent plus minus 1 percent in the second half of 2023," he said when holding a press conference on September 22.

According to Perry, this strategic step is also part of strengthening the policy of stabilizing the rupiah exchange rate so that it is in line with its fundamental value.

"This is a response due to the uncertainty of the global financial market amid the increasing demand for the domestic economy which remains strong," he said.

Perry added, Bank Indonesia also continues to strengthen the response of the policy mix to maintain stability and momentum for national economic recovery.

"Bank Indonesia will strengthen monetary operations through the increase in interest rate structures in the money market in accordance with the increase in BI interest rates," he stressed.

For information, this rate increase is the second in a row after previously in August the central bank increased the BI rate by 25 bps to 3.75 percent.

Through this stipulation, Bank Indonesia is recorded to be increasingly aggressive in adjusting the benchmark interest rate in line with the trend of global monetary authority which has also raised their interest rate.


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