The inflation figure moved in a favourable direction as it decreased to 4.97% (y.o.y), getting closer to BI’s target range of 3±1%. From the external side, the pressure to delay monetary tightening by the US has created momentum for flow of funds into emerging markets, including Indonesia, resulting in capital inflows of IDR8.21 trillion in the second week of April 2023. As a result, Rupiah strengthened to IDR14,750 on 13 April 2023, making it one of the best performers among emerging peers. Considering these factors, we view that BI should hold its policy rate at 5.75% this month while continuing to apply macroprudential measures to support the growth momentum.

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