Bank Indonesia (BI) kept its benchmark rate (7-Day Reverse Repo) unchanged at 6.00% following its Nov MPC meeting, in line with market consensus but not UOB's forecast, of which we expected a 25bps hike. 

BI implied during the Board’s Q&A session that the main reason for last month’s rate hike (and not followed through...) was because of incipient upside risks to its inflation target trajectory next year. That factor has dissipated, according to BI, and underpinned the key reason for today's rate stay decision. In other words, as rupiah stabilized in recent sessions, BI is of the view that upside risks from imported inflation have declined.

Based on today's BI MPC, we had to adjust our BI rate forecast once again. Today's rhetoric seemed assuring for no more rate hike in the near-term (i.e. no more rate hikethis year in Dec) but the semantic of data-dependence still remains. However, considering uncertainty in the global market developments, US Fed rate directions and length of "higher-for-longer" along with other uncertainties surrounding Chinese economic growth and geopolitical tensions as well as on global food and energy prices, we revised our forecast and expect 1 more 25bps rate hike in 1Q24 to 6.25%. That will likely be the terminal rate for the current rate hike cycle.