The latest inflation figure eased and fell in the range of BI’s target of 3±1%. Other indicators, such as CCI and PMI, also showed that the domestic economy remained solid, with optimistic consumer expectations and producers standing above the expansionary territory. On the external side, the Fed’s decision to keep its rate unchanged has allowed Indonesia to maintain the yield spread between Indonesia Government Bonds and the US Treasury Bonds, which resulted in an adequate inflow to Indonesia and solid performance of Rupiah in comparison to other EM currencies. Given these considerations, BI should maintain its policy rate at 5.75% to stabilize Rupiah while observing the Fed’s decision at the upcoming FOMC meeting.

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