Impact of Fed's Interest Rate Hike on the Value of Indonesia's Rupiah

Impact of Fed's Interest Rate Hike on the Value of Indonesia's Rupiah

Impact of Fed's Interest Rate Hike on the Value of Indonesia's Rupiah

Juda Agung, a Bank Indonesia (BI) executive director, declined to assess to the Fed's projection of three rate hikes next year, saying there is "high probability" the USA central bank will later change its plan.

Although the Fed's 0.25 percent rate hike was widely anticipated, few expected to hear a rather hawkish statement from Janet Yellen who said there may be three more interest rate hikes in 2017 (implying that the Federal Reserve is confident about the strength of the U.S. economy).

The Indonesian central bank said it made a decision to keep the benchmark seven-day reverse repurchase rate at 4.75%.

BI also held steady the two other rates, which act as the floor and ceiling of the overnight interbank money market, at 4.00 percent and 5.50 percent, respectively.

The United Arab Emirates central bank said on Thursday it was raising interest rates on its certificates of deposit, its main policy instrument, by 25 basis points.

Market volatility has been heightened since Mr Donald Trump's victory in the U.S. presidential election, giving policymakers in Indonesia reason to pause after the six rate cuts this year.

The bank, which has lowered its policy rate six times since January amid declining inflation, said in a statement that previous monetary easing "can continue to encourage domestic economic growth momentum", taking a step back from its previous statements suggesting additional easing.

Indonesian exports rose 21.3 percent to $13.5 billion in November from a year earlier, which was the highest level in 17 months, Central Statistics Agency (BPS) data showed. "That gives us a picture of an improvement in global trade", said Mr Sasmito Hadi Wibowo, deputy chief of the statistics bureau.

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