Various factors have influenced the improvement in economic conditions in recent times. The start of the rollout of vaccines, massive stimulus from the government, and the gradual opening of economic activity have contributed to the revival of domestic economic activity. However, the health risks from Covid-19 still loom. As reflected in the inflation figures, the relaxation of various social restriction policies and the month of Ramadan, in fact, they have not been able to raise aggregate demand to normal levels. From the external side, apart from the heavy capital inflow in early May 2021, which was largely driven by positive sentiment regarding the domestic economic outlook, this condition tends to be temporary. Various issues, from the possibility of reintroducing lockdowns in several countries to the possibility of tapering-off by the Fed as the US domestic economy begins to recover and the risk of increasing inflation triggers capital outflows from Indonesia. With external pressure still volatile and the need to maintain exchange rate stability and financial conditions, we are of the view that BI needs to maintain its benchmark interest rate at 3,50% this month.

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