Bank Indonesia to tighten again this year

Bank Indonesia (BI) kept its reference rate at 6.75% today, as was widely anticipated. The central bank is still relying on rupiah appreciation to ease the blow from higher commodity prices. Nonetheless, core inflation should continue to trend higher as the economy remains on track for above-trend growth. We still expect BI to resume policy tightening later this year, although now anticipate a slower pace of tightening.