JAKARTA (Reuters) -Bank Indonesia (BI) will strengthen measures to stabilise the rupiah’s exchange rate to mitigate the effects of imported inflation, the country’s finance minister said on Friday.
Sri Mulyani Indrawati made the comment as the chair of Indonesia’s Financial System Stability Committee, which comprises the finance ministry, the central bank, the Financial Services Authority (OJK) and the deposit insurance corporation.
“Going forward, rupiah exchange rate stabilisation measures will be strengthened so that it is in line with its fundamentals and it supports efforts to control imported inflation,” she said at a press conference.
Last month, the central bank unexpectedly raised interest rates by 25 basis points to 6% with an aim to defend the rupiah and mitigate against imported inflation.
The rupiah had been weakening against the U.S. dollar in September and October, falling to its weakest since 2020. However, the Federal Reserve’s decision on Wednesday to keep U.S. rates unchanged has reversed some of the losses.
The rupiah strengthened 0.5% to 15,770 per dollar at 0427 GMT on Friday.
BI Governor Perry Warjiyo told the same press conference that the central bank will use its monetary tools to stabilise the financial markets, with its macroprudential tools to be directed at promoting economic growth.
BI expects inflation to come in around 3% at year-end, or within their target range of 2-4% for 2023, and 2.8% for 2024, the governor said.
Meanwhile, OJK said it has asked financial institutions to regularly monitor their investment portfolios in this volatile environment.
The committee also said their recent stress test showed that the country’s financial sector was “pretty resilient” to face slowdown in the global economy, higher global interest rates and rising geopolitical tensions.
Governor Warjiyo said the test was carried out under several scenarios, including an “extreme” one, though he did not give more details on the parameters used in the test.
“In general, Indonesian financial sector has strong resiliency, with a solid capital cushion and more than enough liquidity,” he said.
The test was conducted after the finance leaders met with President Joko Widodo last month to address the falling rupiah.
(Reporting by Stefanno Sulaiman, Fransiska Nangoy, Gayatri Suroyo; Editing by Kanupriya Kapoor and Jacqueline Wong)
