Economics
Indonesia Needs Rupiah-Bear Retreat for Rate Cuts to Lift Growth
- Central bank pushed up interbank rate to stem currency drop
- Jibor at six-year high will blunt impact of policy easing
A clerk counts Indonesian 100,000 rupiah banknotes for a photograph at a currency exchange office in Jakarta, Indonesia, on Wednesday, Sept. 9, 2015.
Photographer: Dimas Ardian/BloombergThis article is for subscribers only.
The impact of any Indonesian interest-rate cuts depends on how hard the central bank has to work to fight off rupiah bears.
The currency has rebounded 8.8 percent since sinking to a 17-year low in September as the central bank used money-market operations to drive the one-month Jakarta Interbank Offering Rate to a six-year high, making bets on depreciation less appealing. While the monetary authority said last month that there was room to lower its 7.5 percent policy rate, the impact will be blunted should the Jibor remain near the 8.24 percent level reached since Thursday.