Bank Indonesia's pause will be short-lived

Bank Indonesia (BI) paused the tightening initiated last month, leaving the reference rate unchanged at 6.75%. But today’s pause will probably be brief, given that underlying growth has remained robust whilst inflation is likely to rise further in the coming months. We judge that the reference rate will be hiked to 7.5% by mid-2011. Today’s decision was probably influenced by the deceleration in February’s consumer inflation.