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Bank Indonesia governor resignation spotlights policy dilemma on rates
Bank Indonesia has lifted interest rates by a cumulative 100 basis points since May to 5.75%, aiming to defend the rupiah amid currency volatility and inflation pressures.
The sudden resignation of Bank Indonesia governor Perry Warjiyo has brought renewed attention to a regional central bank dilemma over how to set interest rates, with analysts weighing the tradeoff between tightening to defend weakening currencies and loosening to support growth targets.
Warjiyo, who led the central bank for eight years, resigned on Monday nearly two years before the end of his second term, after not signaling an intention to leave until Friday, according to a Bloomberg report cited by SCMP Economy.
SCMP Economy reports that President Prabowo has targeted 8% annual economic growth, a goal that has created friction with the central bank. Analysts link this tension to Warjiyo’s decision to raise rates to bolster the rupiah.
Bank Indonesia has increased rates by a cumulative 100 basis points since May to 5.75% to defend the currency, while volatile oil prices tied to the US-Iran war have weighed on the rupiah. The currency fell to a record low of 18,190 per US dollar on June 8, later paring losses but still trading above 18,000 as of Tuesday.