JAKARTA, Sept. 27 (Xinhua) -- Indonesia's central bank edged up its benchmark interest rate for the fifth time since mid-May on Thursday and encourages investors to carry out currency hedging onshore to bolster rupiah.
The rate-setting meeting of the Indonesian central bank, Bank Indonesia, decided to raise its seven-day reverse repo rate 25 basis points to 5.75 percent, Governor of Bank Indonesia Perry Warjiyo disclosed.
The hike was just hours after the U.S. Federal Reserve hiked interest rate for the third time this year.
The hike extended the tightening cycle applied by the central bank with the total rate hike of 150 basis points since May 17, a move aiming at paring down capital outflows amid hawkish prospects of the U.S. normalization program.
"This aims to maintain stability particularly rupiah value (against the greenback)," Warjiyo said at the lender headquarters.
To brush off further downside risks of the global uncertainty, the central bank is looked to unveil regulations on onshore non-deliverable forward transactions of rupiah against several foreign currencies to offer an alternative hedging product, according to head of monetary management department of the bank Nanang Hendarsyah. The rules are expected to be issued next week, he cited.
The capital outflows have slid rupiah about 9 percent against the U.S. dollar this year, by far, fetching 14,910 per one U.S. dollar after the lender rate hike on Thursday.
During the rate setting meeting, Warjiyo said, the lender also brought up deposited facility rate 25 basis points to 5 percent and lending facility rate 25 basis points to 6.5 percent.
To stave off further shrinkage of rupiah against the greenback, the central bank has conducted currency intervention in the financial market.
The move came along with the government's policy to swiftly drift up import tariffs of over 1,000 items and put off construction of big infrastructure projects to bring down imports as well as extended usage of bio-fuel which is looked to edge off oil import.
