JAKARTA – Indonesia’s central bank raised its benchmark interest rates by 25 basis points on June 18, just a week after a surprise off-cycle rate hike, as it seeks to attract fresh capital inflows and halt selling in its battered rupiah and other assets.Bank Indonesia (BI) raised the seven-day reverse repurchase rate to 5.75 per cent, the highest level since May 2025. Twenty of 35 economists in a Reuters survey had predicted the move; two expected a 50-basis-point increase and the other 13 expected no change.BI also raised the overnight deposit facility rate and lending facility rates by the same amount to 4.75 per cent and 6.50 per cent.The central bank has now hiked its policy rates by a total of 100 basis points in three moves over the past four weeks.BI’s rare off-cycle increase last week reflected mounting urgency to stabilise the rupiah and anchor investor confidence, after the currency hit a series of record lows amid global volatility, capital outflows and rising domestic policy concerns.“We at Bank Indonesia continue to communicate that we are going all out to maintain the stability of the rupiah and control inflation as part of efforts to mitigate the impacts of global volatility,” Governor Perry Warjiyo said in an online press conference.The rupiah slipped to a lifetime trough of 18,190 against the US dollar on June 8 before regaining some ground after BI’s surprise rate hike last week and as global market sentiment was boosted by the US and Iran signing an interim agreement that would end the Iran war and reopen the Strait of Hormuz.“Despite improved domestic sentiment and a sharp drop in oil prices, uncertainty remains high ahead of key reviews from S&P rating and MSCI,” said Rangga Cipta, chief economist of Mandiri Securities.“Global risk-off sentiment from the hawkish stance of central banks in advanced countries added to the urgency for BI to hike, maintaining an attractive premium for investors,” he added.Warjiyo said the central bank sees the prospect of the US Federal Reserve further hiking its policy rate due to higher inflation expectations in the US.Economists from Bank Permata and Capital Economics said they now expect the main policy rate to be maintained until the end of 2026.The rupiah has been weighed down by a number of factors that have alarmed investors, from President Prabowo Subianto’s populist spending plans and expensive fuel subsidies straining the national budget to a controversial commodity export policy and doubts about the central bank’s autonomy.The Jakarta stock market has also faced massive sell-offs and could see further capital flight if a review underway by global index provider MSCI leads to a downgrade of Indonesia’s market status to “frontier” from “emerging”.The rupiah strengthened to 17,700 a US dollar after the rate rise from 17,805 earlier.BI on June 18 also announced it will tighten requirements for foreign exchange transactions. From July 1, BI will require supporting documents for outgoing foreign exchange transfers of above US$25,000 (S$32,200), down from the current threshold of US$50,000.A similar threshold for cash purchases of foreign currency will also be cut to US$10,000, from US$25,000 previously.Inflation quickened slightly in May to 3.08 per cent, but remained within the central bank’s target range of 1.5 per cent to 3.5 per cent.Inflationary pressures could heighten further, with state energy firm Pertamina raising some fuel prices significantly last week and with the El Nino weather pattern threatening a lengthy dry spell that could impact food production. REUTERS