Policymakers in Indonesia can make a case that more monetary and fiscal support is warranted given the economic drag from recent protests and flooding as well as US tariffs, and the backdrop of low inflation. But the way officials are pursuing this – by threatening the guardrails of macro orthodoxy – is unnerving investors. The key concern is not so much that looser policy causes a near-term surge in inflation, but that stimulus won’t be withdrawn when the economic cycle turns, eventually leading to overheating.
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