June’s inflation rate slightly fell to 3.28% (yoy) from 3.32% in May. This could indicate stabilizing trend of expected inflation in the medium term. A seemingly increasing trend of core inflation in the last several months should not be misperceived as an improvement in the households’ demand; it  only reflects a seasonal pattern. From the external side, the global economic slowdown continues. GDP of the developed economies persistently showing lower expected growth rates until at least 2020. Big emerging market economies like China and India are not picking up growth either. This poses continuing challenge to Indonesia’s external position. We project that the current account deficit (CAD) in Q2 2019 is going to be worse than the previous quarter. We maintain our view that achieving a substantial improvement of CAD in 2019 will remain a challenge. Current structural policies pursued by the GoI need to be bolstered further.

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