Indonesian and Filipino Central Bank Rate Hikes
November 17, 2022
Bank Indonesia’s policy interest rate underwent its fourth increase since an initial 25-basis point move in August, rising to 5.25% from 4.75%. Hikes in September and October had also been by a half percentage point. In response to the pandemic, five 25-basis point cuts in 2020 were culminated with a final reduction to 3.50% in February 2021. Indonesian CPI inflation of 5.71% as of October still exceeds the central bank’s medium-term target corridor of 2-4%. At 5.25%, Indonesia’s interest rate is its highest in 38 months.
The Filipino central bank policy rate hike of 75 basis points today was larger than Indonesia’s and the previous two increases done in August and September. Markets were prepared rhetorically for this larger action. At a 164-month high of 5.0%, the new policy rate level still undershoots CPI inflation, which has accelerated to a 14-year high of 7.7% and exceeds the central bank’s inflation target ceiling of 4%. By matching the Fed’s last rate increase, monetary officials hope to prevent further depreciation of their currency.
Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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