Headline inflation rate eased to the upper range of BI’s target with benign core inflation. Amidst declining commodity prices driven by declining global demand, the trade balance still posted a modest surplus with a remarkable performance of imports reflecting the ongoing domestic economic improvements amid the risk of a global slowdown. Externally, the Fed’s current pause of rate hikes somehow brings fresh air for Indonesia to enjoy capital inflows and strengthened Rupiah to around IDR14,800-14,900. With the recent developments, we view BI should keep its policy rate at 5.75% this month to maintain price and exchange rate stability while continuing accommodative measures to support economic growth.

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