BANK Indonesia (BI) has been compelled to take a decisive step in combating the depreciation of the rupiah by raising interest rates. Last week, BI’s reference rate, the BI Rate, was elevated from 6 percent to 6.25 percent. This move is expected to inevitably dampen economic growth. Such is the cost of stabilizing the rupiah.

The market, however, did not respond enthusiastically. A day before the rate hike, the exchange rate did sligh