Considering slightly higher inflation and increased economic activity, offset by a decline in US growth prospects, Bank Indonesia still needs to maintain the benchmark interest rate at 4.75%. Our view is slightly biased towards a reduction in interest rates at this Thursday's meeting, considering that inflationary pressures are not as high as pressures from Rupiah appreciation caused by the increase in the sovereign rating and the decline in the possibility of the Fed increasing the FFR due to lowered US economic growth prospects. BI's reduction in the benchmark interest rate will only occur if inflation after Eid al-Fitr returns to a more stable level.

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