Bank Indonesia (BI) left its reference rate unchanged today at 6.5%, as was universally expected. Nevertheless, the reference rate is now negative in real terms while inflation will probably accelerate further in coming months. Capital inflow and rupiah appreciation concerns are also being tackled via targeted curbs and reserve requirement changes. Accordingly, we forecast that BI will lift the reference rate from February and will hike a cumulative 100bp during the course of 2011.