Inflation continues to soar above BI's target range after adjusting subsidized fuel prices in early September 2022. Price levels in the energy and transportation sectors recorded their highest spike in September 2022 amidst still high global energy and food prices. The increase in price levels slightly corrected consumer confidence even though it was still in optimistic territory. From the external side, the trade surplus decreased due to the trend of normalizing global commodity prices. At the same time, the risk of global financial turmoil continues with episodes of capital outflow due to aggressive monetary tightening by central banks around the world. Even though BI has raised interest rates twice, the heavy capital outflow caused the Rupiah to weaken to IDR 15.485 in mid-October. As a preventive measure to anticipate the potential for additional capital outflow due to a further increase in interest rates by the Fed next month, BI needs to increase interest rates by 50 bps to 4,75% this month. This step-ahead attitude is expected to reduce the impact of external uncertainty on domestic financial and foreign exchange markets. At the same time, the Indonesian Government can take steps to maintain the momentum of demand recovery and real sector optimism regarding the prospects for national economic growth.

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