Indonesia to delay rate hikes further

Bank Indonesia (BI) left rates at 6.50% today, as expected. The upswing will stay strong but the high level of the rupiah is helping to keep inflation pressures contained. We now expect the first rate hike to be delayed until September, and then see rates moving to 7.25% by end-2010. Government bonds have little upside from here but the rupiah should climb further.

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