Bank Indonesia unexpectedly raised the country’s benchmark interest rate to 7.25% from 7%.
According to Bloomberg’s Mia Saini, 16 of 23 economists expected rates to be held unchanged.
The move is intended to defend Indonesia’s currency, the rupiah, which has been one of the weakest currencies in the world this year.
“Indonesia hikes 25bp. Seemingly against the consensus of unchanged but what were they supposed to do…?” tweeted Barnejek, a savvy emerging markets commentator.
Emerging market countries like Indonesia and India have the seemingly impossible task of stimulating their local economies while containing runaway inflation.
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