I think, with inflation still rising, the central bank will have to increase the rate again.
... given the magnitude of the fuel price hike it can be very emotional, it will be very emotional among the public at large.
Unless the government really accelerates spending, there will be no improvement in the economy. We had hoped that the government could really play a greater role this year.
We believe the rate has peaked already. Bank Indonesia will want to make sure that inflation is on a definite down-trend before they cut.
If the investment climate has not improved sufficiently to maintain capital inflows by the time BI cuts its rates in the second half of 2006, then capital outflow will be the likely result.
Premature rate cuts could trigger inflationary expectations that could reduce, if not reverse, the capital inflows.
This is a good sign to show that the government is moving in the right direction.
