Bank Indonesia (BI) loosened its monetary policy stance by lowering the reserve requirement rate in November. What the central bank will do this week is likely to be dependent on the US Fed rate decision and its potential impact in the markets. The rise in the USD/IDR in recent weeks might just have urged BI to remain cautious. BI is expected to keep its key benchmark rate steady at 7.50%. 

Lowering interest rates at the expense of rupiah stability is unlikely to be an option at this juncture. As it is, the impact from marginal cuts to the BI rate may not be that significant to GDP growth momentum ahead. Sentiment among businesses remains relatively weak into 2016. The pace of fiscal spending is of more significance for stronger growth momentum ahead. 

For now, BI would rather remain cautious. Given any bout of market volatility, external financing risks may continue to drag investors' sentiment on Indonesia. Even if the current account (C/A) deficit has narrowed to 2% of GDP in 1H15, it has been due to a slump in imports more than anything else. 

"We expect C/A deficit to widen again to 2.5% of GDP in 2016, barring any sudden turn in global commodity prices", notes DBS Group Research.