The Bank Indonesia (BI) would likely hike its policy rate by 25 bps at its event next week, notes UOB Group’s Economist Lee Sue Ann.

Key Quotes

“BI is of the view that higher inflation is mainly driven by the supply-side disruptions and although it will reach beyond its upper target range of 2%-4% in 2022, core inflation is not under significant upward pressure.”

“Nevertheless, we expect inflation expectation to continue building up, and look for BI to hike its benchmark interest rates as early as Aug. Our forecast is for two 25bps hikes in 3Q 2022 to 4.00%, followed by another two 25bps hikes in 4Q 2022 to 4.50%.”