Indonesia’s robust growth highlights overheating risks

Today’s Q2 GDP data for Indonesia confirm that growth remained brisk, underpinned by rising commodity exports and resilient domestic demand. We maintain our view that further monetary tightening at some point makes sense given that the policy rate is historically low and relying on currency gains alone to cool demand is unwise for a relatively-closed economy. However, growing global risks mean that Bank Indonesia (BI) is unlikely to hike next week.