The inflation rate moved in the opposite direction as it increased to 5,47% (yoy) after experiencing a downward pattern since September 2022. This was mainly contributed by a combination of supply disruptions due to flooding during the harvest season and the existing low base effect. From the external side, expectations of aggressive interest rate increases by the US have driven funds out of Indonesia with capital outflows recorded at USD938 million since mid-February 2023. However, the recent SVB tragedy may force the Fed to be less aggressive in tightening policy monetary in the near future. The US' insistence on postponing monetary tightening will create momentum for the flow of funds into developing countries, including Indonesia. On the other hand, the domestic currency has finally stabilized after a series of depreciations with the Rupiah now hovering around IDR 15.367. Considering these factors, we see that BI should maintain its policy interest rate at 5,75% this month while continuing to implement macroprudential measures to support growth momentum.
