(Bloomberg) -- Bank Indonesia Governor Perry Warjiyo has signaled that policymakers don’t need to raise interest rates further while pledging to sustain efforts to boost the rupiah past the 16,000 level.

“The data we view recently shows that there is no longer a need to increase the BI rate,” he said at a briefing on economic developments on Wednesday in Jakarta, while stressing that policymakers remain data-dependent and will make the decision at the meeting later this month.

The governor made the remarks, along with sanguine forecasts on economic growth and inflation, just two weeks after he surprised the markets with a quarter-point hike to shore up the currency. The rupiah has since gained by about 1% as global funds returned to Indonesian assets. BI’s shock rate hike to 6.25% on April 24, followed by the sharp increase in market rates, have provided investors more attractive yield differentials, he said.

“Overall, we see improvements in global and market developments that are better than what we expected at the time of BI rate decision last month,” he said, while vowing to keep on working to spur the currency toward its fundamental level which is below 16,000 per dollar. 

The rupiah will appreciate faster than policymakers previously expected, he said without giving a timeframe. The currency erased earlier losses after Warjiyo promised sustained support and closed at 16,045 per dollar on Wednesday. Month-to-date, it’s strengthened more than 1.3%, the second-best performer in emerging Asia.

Bank Indonesia’s goal to push rupiah below 16,000 could be challenging to achieve as it relies mostly on the US economic data, according to Alan Lau, a strategist at Malayan Banking Bhd in Singapore. “However, the words from the governor itself can be seen as providing support for the IDR as it reflects the determination of the central bank to defend the currency,” he added. 

Better Prospects

Global risk appears to be receding and the Federal Reserve’s latest comments tilted less hawkish, said Warjiyo, who still expects one Fed rate cut in December. There’s lower risk of no cuts this year, he said. 

Foreign exchange reserves, which saw the biggest drop in nearly a year in April, will increase as foreign funds return and corporate dollar demand for dividend repatriation subsides, Warjiyo added. The stockpile is also “far more than enough” to cover needs that include market intervention.

Southeast Asia’s largest economy is expected to grow above 5% this quarter, which should pull in more investors, Warjiyo said. Headline and core inflation should end the year at 3.2% and 2.6%, respectively, both well within BI’s 1.5%-3.5% target range.

Despite the latest rate hike, banks have ample liquidity and incentives are in the works to further encourage lending, he said.

BI’s press conference on Wednesday is a rare occurrence outside of monthly monetary policy decisions. Warjiyo said that BI plans to hold more frequent briefings to update investors about market developments and the central bank’s responses.

--With assistance from Matthew Burgess.

(Updates with analyst comment in sixth paragraph.)

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