* Policy rate on hold at 7.50 pct for 5th straight meeting
* FASBI and lending rate also unchanged
* BI sees Q1 GDP growth at 5.77 pct y/y
By Adriana Nina Kusuma and Rieka Rahadiana
JAKARTA, April 8 Bank Indonesia kept its
benchmark reference rate steady for a fifth straight
month, saying the current level was consistent with efforts to
meet its inflation target this year.
The policy stance will also help lower the country's large
current-account deficit, which unnerved investors last year when
it climbed to record highs and sparked a sell-off in the rupiah.
Southeast Asia's largest economy appears to have turned a
corner with its trade balance reverting to surplus in February
and inflation easing.
With confidence returning to the rupiah, Bank Indonesia has
held rates steady this year while other major emerging economies
were forced to raise them to fend off outflows.
"Provided inflation falls back as expected and there is no
renewed pressure on the rupiah, the next move in rates is likely
to be downwards, but probably not before the end of the year,"
said Krystal Tan, Asia economist at Capital Economics.
All 15 analysts in a Reuters poll had expected the policy
rate to be kept on hold as pressures had eased on both the
current-account deficit and the rupiah. The Indonesian currency
has rebounded, up 7.7 percent so far this year to become Asia's
best performing currency after being its worst last year.
The central bank also held the deposit facility rate (FASBI)
and lending facility rate at 5.75 percent and 7.50 percent,
Singapore-based economist at OCBC, Wellian Wiranto, said
the central bank may face pressure to cut rates on some views
easing inflation should be followed with loose monetary policy.
"Loosening the belt to allow more gorging may seem
immediately gratifying but is hardly helpful to the economy's
long-term health," Wiranto said.
Bank Indonesia said the economy in the first quarter would
grow 5.77 percent, a shade faster than the fourth quarter,
bolstered by the global recovery.
The central bank last month trimmed its growth forecast to
5.5-5.9 percent this year from 5.8-6.2 percent, despite an
increase in spending for legislative and presidential elections.
Indonesia has reaped from a recovery in commodity prices,
mainly coal and crude palm oil, which helped turn its trade
balance in February to a surplus of $790 million from a $450
million deficit the previous month.
INFLATION IN FOCUS
The central bank has repeatedly expressed concern over core
inflation, an indicator of the longer-term trend in consumer
prices, and reiterated it would keep a close eye on prices.
"Going forward, BI will remain vigilant on some risks ...
such as the adjustment in administered prices and the potential
of rising food prices due to the dry season in some regions,
including the possibility of El Nino," said central bank
spokesman Tirta Segara.
The central bank aims for a range of 3.5 to 5.5 percent for
inflation in 2014, far lower than the 8.38 percent rate of last
year, but remains watchful of factors that may push prices up.
Indonesia's consumer price index nearly breached 10 percent
in mid-2013 after fuel price increases in late June.
A Bank Indonesia survey on Friday showed that consumers were
more optimistic about the economy in the next six months but
remain concerned over the political and economic outlook after
presidential elections in July. The survey also found that
consumers see the possibility of further rises in fuel prices
and electricity tariffs this year.
The government plans to propose revising the budget in May,
after a new parliament is formed, with possible cuts to
allocation for fuel subsidies that may force the central bank to
raise its policy rate to mitigate inflation from rising prices.
Bank Indonesia has estimated that the current-account
deficit will fall under 3 percent of gross domestic product this
year, compared with 3.3 percent in 2013.
The widest measure of the flow of goods, services and money
in and out of the country hit a record of 4.4 percent in the
second quarter of last year.
(Additional reporting by Nilufar Rizki and Cheon Jong Woo in
SINGAPORE; Editing by Jacqueline Wong)