Bank Indonesia stays on hold but rate hikes still close

Bank Indonesia (BI) left its policy rate at 6.5% today, as expected. The neutral bias was retained too, probably with the aim of trying to curb rupiah appreciation. Rupiah strength is relevant to the policy rates outlook but inflation is still likely to rise sharply over the next few months. Therefore, the BI will probably be amongst the next wave in Asia to hike, we forecast from January 2010.

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