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

Pressured by increasing global energy and food prices combined with seasonal patterns of Christmas and year-end festivity, Indonesia ended 2022 with
headline inflation of 5.51% (y.o.y), making the full 2022 headline inflation far above BI’s target corridor. Meanwhile, Rupiah experienced slight appreciation in mid-January to around IDR15,100 per US Dollar supported by modest capital inflows due to cooling inflation in most economies and less aggressive stance by most central banks. The Fed is expected to continue its hawkish stance in early 2023.  These three combined suggested that BI still need to increase its policy rate this month by 25bps in an effort to maintain Rupiah stability as well as reducing inflationary pressure.

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