CIMB economists say Bank Indonesia could raise policy rates by 25 bps in Q4 if
external shocks and inflation once again pressure the rupiah. They note a
narrowing current-account deficit may support the rupiah in H2, but the Fed rate
path, a stronger dollar and oil remain key external drivers. Domestic inflation
risks are skewed to the upside due to El Nifio-driven food risks and potential
Middle East energy-price volatility. With growth expected to slow in H2, CIMB
expects BI to remain patient while closely monitoring global rates and the
currency.