"We hope the BI rate will be temporary. Dont raise it again," Kadin Deputy Chairman for Small and Medium Businesses and Cooperatives Erwin Aksa said here on Monday.
The policy to raise the key rate had sparked a controversy since it might disrupt the national economic growth and business world, he said.
He said the policy would be temporary to strengthen the rupiahs exchange rate against the US dollar.
He reminded the central bank of many other ways to strengthen the rupiah, including reducing the countrys dependence on imported goods by boosting the domestic industry.
Bank Indonesia has decided to raise its benchmark rate, locally known as BI Rate, by 25 points to 7.5 percent from 7.25 percent, citing the widening current account deficit amid the risk of high global uncertainty.
At the meeting of its board of governors last Tuesday (Nov 12), the central bank also decided to raise lending facility and deposit facility rates to 7.5 percent and 5.75 percent respectively.
"The decision was taken to ensure that the current account deficit will decline to a healthier level and inflation rate can be kept in check to reach the range target of 3.5-5.5 percent in 2014 to support the economic growth," said Difi A Johansyah, executive director of the central banks communication department.
Head of Investment of PT BCA Sekuritas Herdi Ranu Wibowo predicted the key interest rate hike would raise the foreign holding of state bonds at the end of this year.
"With the BI Rate being raised again, I predict foreign investors will prefer to invest in bonds than in shares, provided that the rupiahs exchange rate remains stable and the current account deficit will not increase," he said.
(S012/INE/O001)
EDITED BY INE
Reporting by Muhammad Razi Rahman
(KR-BSR/O001)
Editor: Jafar M Sidik
Copyright © ANTARA 2013
