Indonesia Unexpectedly Raises Rates - NYTimes.com JAKARTA - Indonesia raised interest rates in a surprise move on Thursday, signaling growing alarm over its currency, which is Asia's worst-performing this year. But other central banks in the region held steady in advance of the U.S. Federal Reserve meeting next week. The Indonesian central bank's increase in three benchmark rates came on the same day that central banks in New Zealand, the Philippines and South Korea decided that their economies were robust enough to withstand the expected start by the Fed in reduction of its bond-buying program. There has been a flight of money from emerging markets for the past few months because investors have anticipated higher yields from U.S. Treasury securities, leaving exposed economies, like Indonesia and India, dependent on capital inflows to cover large current-account deficits. Some economists said the Indonesian decision might be enough to slow the slide in its currency, the rupiah, which strengthened after the announcement but is down 16 percent this year. "We believe that the current bout of currency volatility is nearing an end and that a prolonged reversal of capital flows is unlikely," said Gareth Leather, economist at Capital Economics Asia. As such, we think further aggressive rate hikes in Indonesia will be unnecessary. Central banks worldwide are waiting for the Fed meeting next week to gauge the U.S. central bank's readiness to bring a gradual end to the era of plenty for emerging economies. The Indonesian central bank has now raised its benchmark rate a total of 1.5 percentage points in a series of increases since June, when the exodus from emerging markets became significant. Indonesia's current-account deficit is equivalent to 4.4 percent of gross domestic product, and its inflation has surged to almost 9 percent, draining investor confidence in its economy. In New Zealand, the central bank announced it was keeping its benchmark rate at 2.5 percent. It also raised its outlook for 90-day bank bill rates to 3 percent in the quarter that will end next June, indicating that rates may rise a quarter percentage point by that time. That is sooner than indicated in the bank's previous statement. Also keeping its rates on hold, the Philippine central bank said it expected inflation to remain subdued into next year, despite the peso's declines and pressure from volatile oil prices. Most economists see the central bank holding rates for the rest of this year, with growth expected to hit about 7 percent. At 2.5 percent, the benchmark rate in South Korea is near a record low, and the central bank's decision to maintain its easy monetary policy was expected because it has been supporting the government's fiscal stimulus. The Indian central bank has delayed its policy meeting, which would have coincided with the Fed's, until two days later.