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Indonesia Lifts Deposit Facility Rate To Counter Rupiah Slide

BankIndonesia 061213

Indonesia's central bank raised the interest rate on deposit facility after the rupiah touched its weakest level since 2009. The bank also said it will maintain sufficient liquidity in the market.

In a statement on Tuesday, Bank Indonesia said it is raising the deposit facility rate by 25 basis points to 4.25 percent, effective from June 12. The central bank said that this was "pre-emptive measure" and is aimed at maintaining monetary stability.

The bank said it is "fully prepared to take necessary measures to stabilise monetary conditions in light of recent rupiah depreciation." It also pledged to "continue to meet the market requirement for rupiah and forex liquidity."

The overnight deposit facility rate or Fasbi is the rate that central bank pays to lenders for their deposits. The rate was last raised in August 2012.

Indonesia's economic growth tumbled to a two-year low in the first quarter of 2013, with the gross domestic product rising 6.02 percent on a yearly basis, according to official data released last month.

In April, Bank Indonesia downgraded its growth forecast for this year to 6.2-6.6 percent from the previously estimated of 6.3-6.8 percent.

The central bank has retained the benchmark BI rate at record low of 5.75 percent since a quarter-point reduction in February 2012.

Asian currencies have been under pressure as capital flowed out of the region amid speculation that the Federal Reserve may start winding up its bond-buying operations.

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