Although at the May monetary policy meeting (16-17 May) Bank Indonesia had already raised its key rate - the seven-day reverse repo rate - by 25 bps (the first rate hike in Indonesia in four years), this move had already been priced in into the market and therefore failed to strengthen the rupiah rate that has been plagued by heavy pressures amid high US treasury yields, further looming monetary tightening in the USA, and concerns about global trade.

The ad hoc meeting is a sign that newly inaugurated Bank Indonesia Governor Perry Warjiyo is more willing to take preventive actions compared to his predecessor Agus Martowardojo. Warjiyo was quoted saying: "we want to be ahead of the curve prior to the FOMC [Federal Open Market Committee] meeting [scheduled for 12-13 June 2018]. That is the reason why we will hold an additional Board of Governors meeting on Wednesday."

Besides monetary policy, Warjiyo added that Bank Indonesia will continue to optimize its dual intervention policy in the foreign exchange and bonds markets to safeguard plenty of liquidity amid the high degree of volatility at the moment.

The latest Fed minutes, which were released last week, signal that the US central bank will raise its benchmark rate at the June policy meeting, hence putting pressure on emerging market assets, including the Jakarta Composite Index and the rupiah exchange rate.

The signal that is given by Bank Indonesia has a big impact on the nation's assets on Monday's trading day (28/05). By 15:15 pm local Jakarta time the benchmark Jakarta Composite Index had soared 1.33 percent to 6,055.12 points (hence being the best-performing national benchmark index in Asia today). Meanwhile, the rupiah had appreciated 0.94 percent to IDR 13,992 per US dollar by the same time (Bloomberg Dollar Index). Thus, two important psychological levels have been crossed: the 6,000 points level for Indonesian stocks and the IDR 14,000 per US dollar level for the rupiah.

At a press conference on Monday (28/05) Warjiyo said he sees three key factors that cause pressures on emerging market assets:

(1) Due to the improving US economy, market participants believe the Fed becomes more aggressive in terms of raising its benchmark Fed Funds Rate.

(2) More expansive US fiscal policies, tax reductions, and greater fiscal expansion result in growing US fiscal deficits (perhaps equivalent to 4-5 percent of GDP in 2019). Thus, US debt is rising, and therefore US treasury yields grow accordingly.

(3) Markets remain concerned about disappointing US-China trade negotiations. This could even lead to a global trade war.