MACROECONOMIC ANALYSIS SERIES: BI Board of Governor Meeting, April 2021

Continuation of domestic recovery trend is gaining traction. These achievements are driven by accelerating vaccination program and government stimulus, such as tax discount on luxury goods. Despite these figures, unlike the usual, inflation remains muted during the start of Ramadhan. On the external side, uncertainty mostly comes from the US developments. Massive progress on vaccination, stronger labor market, and better-than-expected inflation indicate very good news on the economy, prompting investors to put their assets to safe haven instruments. This put pressure on Rupiah as we see it depreciates against USD to IDR14,572 at the end of March. This month, we see The US 10-year treasury yield then gradually went down and capital starts to move to emerging markets,  including Indonesia. Despite low inflation, to continue anchoring Rupiah and to support recovery, BI should hold its policy rate steady at 3.50% this month.

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