In the midst of gloomy global growth prospects and high inflation rates in various parts of the world, the Indonesian economy has shown more optimistic developments in 2022. The economy grew by 5,44% (yoy) in the second quarter of 2022, higher than various estimates . Core inflation remains relatively stable compared to general inflation, although we project the trend will continue to increase. From the external side, the Fed's aggressive steps have triggered smaller interest rate spreads, encouraging capital flows out of developing countries. Luckily, net capital outflows did not occur in Indonesia this month due to positive market sentiment regarding domestic economic fundamentals, especially after the publication of second quarter growth which strengthened capital inflows into the domestic financial market. As a result, the Rupiah strengthened in mid-August to a level of around IDR 14.800. Therefore, we see that BI still has room to maintain its policy interest rate at 3,50% this month to support external resilience while maintaining macroeconomic and financial system stability.

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