Key facts
- Indonesia's central bank and finance minister agreed to increase yields on Indonesian assets.
- The move aims to attract portfolio inflows and support the rupiah.
- The rupiah has hit record lows in recent weeks.
- Bank Indonesia has increased currency interventions and purchased long-dated government bonds.
- Concerns exist over President Prabowo Subianto's spending plans and central bank autonomy.
JAKARTA, June 6 (Reuters) - Indonesia's central bank and finance minister have agreed to increase yields on Indonesian assets to attract portfolio inflows and support the rupiah, which has recently hit record lows. Governor Perry Warjiyo of Bank Indonesia stated that the move is intended to encourage the return of portfolio inflows, though he did not provide specific details on the plan. Southeast Asia's largest economy has experienced significant capital outflows this year, leading to a more than 30% plunge in its stock market and a decline in the rupiah. Investor concerns stem from President Prabowo Subianto's expansive spending plans, rising fuel subsidies exacerbated by the Iran war, and worries about the central bank's autonomy, stock market transparency, and the new plan to centralize major commodity exports. Bank Indonesia has increased its currency interventions to defend the rupiah and has also purchased long-dated government bonds to manage liquidity and prevent yields from rising excessively. The finance ministry has also engaged in bond market operations to manage yields. It remains unclear how Saturday's agreement will impact monetary operations or future government bond auctions. In May, the central bank raised its policy interest rates by a larger-than-expected 50 basis points to support the rupiah. Finance Minister Purbaya expressed hope that this synergy between fiscal and monetary authorities would enhance investor trust.