world-economy

Bank Indonesia Expected to Raise Rates as Rupiah Weakens to Record Lows

Bank Indonesia is widely expected to increase its benchmark interest rate as the rupiah slides to historic lows, forcing the central bank to defend the currency more aggressively. The rupiah's decline has intensified pressure on policymakers to act, marking a potential first rate increase in two years. The central bank has already deployed foreign-exchange reserves to support the rupiah. Reserves fell to their lowest level in nearly two years as of April. Analysts warn that rate increases and other defensive measures may prove insufficient to prevent further erosion of Indonesia's assets. Indonesia's external position has weakened considerably, limiting the policy toolkit available to address currency depreciation and inflation pressures simultaneously.