MACROECONOMIC ANALYSIS SERIES: BI Board of Governor Meeting, February 2023

Massive inflationary pressures last year, were met by consistent monetary tightening efforts by Bank Indonesia since last August. As a result, headline inflation continued to decline and stood at 5.28% (y.o.y) in January 2023. The rapid capital inflow since mid-January, has lifted Rupiah to its strongest level of IDR14,875 in early February and currently stabilized at around IDR15,090.  Considering these factors, in addition to the current less aggressive stance by the Fed, we view that holding policy rate at 5.75% this month should be adequate to maintain price and exchange rate stability while continuing the macroprudential measures without jeopardizing the current economic growth momentum.

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