Indonesia's inflation remains stable and in line with BI's target range. Volatile trends in core inflation, government-administered prices and food groups in August demonstrate the government's ongoing efforts to maintain price stability amidst various challenges, especially the El Nino phenomenon—which is expected to peak in August to September—as well as the suspension of the Black Sea Grain Initiatives. The economy also grew stronger than expected in the second quarter of this year, thanks to strong domestic demand. Even though there was an outflow of capital from the Indonesian financial market due to the Fed again raising interest rates at the FOMC last July, Indonesia maintained a higher trade surplus in August 2023 compared to July 2023. The Rupiah was also recorded as one of the best performing currencies among developing countries. Therefore, foreign exchange adequacy will be higher so that it can help stabilize the exchange rate without giving rise to pressure for BI to change interest rates. Overall, we see that BI should maintain its benchmark interest rate at the current level of 5,75% while continuing to monitor the stability of the Rupiah and maintaining domestic prices.

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