Headline inflation (+0.3% mom, +1.7% yoy) and a new record-high manufacturing PMI point to stronger demand in May. We lower our 2021 inflation forecast to 2.0% to reflect soft price growth YTD, but expect the inflation to return to BI’s 2-4% target in 2H21F. With improving economic activity, we expect Bank Indonesia (BI) to leave the policy rate unchanged at 3.50% for the rest of the year.
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