(Corrects sixth paragraph to add the word billion)
By Rieka Rahadiana
JAKARTA, March 7 Indonesia's central bank left
its benchmark interest rate unchanged at a record low 5.75
percent, as expected, saying it expects price pressures to ease
after inflation hit a 20-month high in February.
Bank Indonesia (BI) reiterated that it will maintain the
stability of the rupiah, which has been under pressure
since last year because of the country's trade and current
All 13 economists surveyed by Reuters before Thursday's
announcement had expected the benchmark policy rate to be
BI, which also held its deposit facility rate unchanged,
said the current policy rate is consistent with its
inflation targets and that it expects inflationary pressures to
ease as the harvest season is under way.
Some analysts have been calling for Bank Indonesia to start
raising interest rates to keep inflation in check and bolster
the rupiah, which was emerging Asia's weakest currency last
year, sliding about 6 percent against the dollar.
The rupiah, which has weakened about 0.6 percent against the
dollar this year, did not move from 9,690 per dollar after the
central bank's decision. It also did not react immediately to
announcement of the end-February foreign exchange reserves,
which fell to $105.2 billion from $108.8 billion a month
"The fall in FX reserves seems to indicate that they have
been more active to supply U.S. dollars in the market," said
Gundy Cahyadi, an economist at OCBC Bank in Singapore.
In keeping the policy rate at the record low, BI is helping
prop up economic growth, which has been above 6 percent a year.
The central bank said it expects 2013 economic growth to be
at the bottom end of its range of 6.3-6.8 percent range.
Gareth Leather of Capital Economics said given the uncertain
global outlook and "provided that inflationary pressures remain
contained", interest rates will remain on hold the rest of 2013
and that policy tightening will likely begin in 2014.
FOOD PRICES UP IN FEBRUARY
The statistics bureau reported higher-than-expected annual
headline inflation of 5.3 percent in February, a 20-month high,
after restrictions on some food imports pushed prices higher.
Core inflation, which exclude volatile foods and
administered prices, declined slightly from January to 4.29
Indonesia has been containing inflation by continuing to
subsidise fuel costs, though that has meant heavy government
spending on subsidies.
Many economists say the subsidies must be cut, but President
Susilo Bambang Yudhoyono is reluctant to cut them, especially
with national elections due next year.
In January, the trade deficit narrowed to $170 billion from
a revised $190 billion for December.
Thursday's rate-policy meeting came amid a process to change
the country central bank's governor.
Yudhoyono has nominated Finance Minister Agus Martowardojo
to replace Darmin Nasution when his term ends in May.
Parliament needs to approve the appointment, and some members
oppose Martowardojo, whose nomination was rejected in 2008.
On Tuesday, Martowardojo cleared the first hurdle as a
parliamentary commission agreed his nomination could be
considered. A hearing on his nomination will be held on March
(Additional reporting by Fathiya Dahrul and Andjarsari
Paramaditha in Jakarta; Editing by Richard Borsuk)