As expected, Bank Indonesia (BI) today held the policy rate steady at 6.5%. Monetary conditions have actually tightened in recent months given that rupiah appreciation has more than offset the fall in real interest rates. The pressure from food price inflation has eased too. Nevertheless, domestic demand should continue to expand at a rapid pace and will increasingly push against capacity constraints. Accordingly, we judge that a hike in the reference rate is only a matter of time. We expect a first move in December and, like the consensus, anticipate that this rate will move up 100bp by end-2011.