BI Rate Rises by 75 Bps in a Short Time, Can It Quell Volatility?

The policy of Bank Indonesia, which raised the benchmark interest rate by 75 basis points to 5.50% within the last month, will impact the Indonesian financial market, particularly the bond market, according to the Chairperson of the Indonesian Investment Managers Association (AMII), Lolita Liliana. The rate hike is set to increase bond yields, and the spread between Government Securities (SBN) and US Treasury bonds will widen, making SBN more attractive to foreign investors, which in turn will strengthen the Rupiah. In mutual funds, current market volatility is also influencing a rebalancing towards money market funds. Currently, market participants still tend to be wait and see regarding the development of Indonesia’s financial market turmoil, although there remains potential that can be captured by investors.