Indonesia's central bank, on Tuesday, increased its benchmark overnight policy rate again, as part of efforts to help the rupiah, which has depreciated amid a surge in capital outflow and weaker exports that caused the nation's current account deficit to soar.

"Bank Indonesia surprised the market by raising both its BI and FASBI rates by 25 basis points on Tuesday. The central bank justified the move as another step to address the current account problem," said Gundy Cahyadi, an analyst with DBS Bank in Singapore.

"Presumably though, the surprise move is more of a step to try and contain some pressures in the financial market."

The benchmark BI rate was raised to 7.5 percent, the highest level since 2009. The outcome of Tuesday's monthly policy rate meeting of the board of the governor of the bank was considered unexpected as most analysts surveyed by both Bloomberg and Reuters predicted no more rate hike.

BI also raised the deposit facility rate, known as FASBI, to 5.75 percent from 5.5 percent.

Cummulatively, the BI rate has been raised by 1.75 percent tage point since early June to boost the appeal of Indonesian high-risk, but high return assets amid moves by global investors to dump emerging market assets due to concerns about the global economic slowdown. The tightening monetary policy was also aimed to combat inflation, which has soared due to the subsidized fuel price increase in June, imported inflation and higher electricity cost.
“Recent trade data shows that the improvement of the current-account may not be very swift,” said Helmi Arman, an economist with Citibank Indonesia, adding tightening policies are still warranted.”

Also on Tuesday, Difi A. Djohansyah, a Bank Indonesia spokesman said the country's current account deficit may likely narrow to around 3.7 percent to 3.8 percent of the nation's gross domestic product. That compares to the 4.4 percent of GDP ratio in the previous quarter.

Difi said the current account deficit may narrow to around $8.4 billion in July-September period from nearly $10 billion in the second quarter.
The central bank will release the current-account data on Wednesday