Indonesia's central bank on Tuesday decided to retain the benchmark interest rate unchanged at 5.75 percent, saying that the current rate is consistent with the inflation target.
Bank Indonesia said that the economy is still showing strong performance, but remained under pressure from external factors such as its mounting current account deficit. Indonesia's imports have grown considerably amidst global economic slump, it observed.
Inflation increased in January as severe weather conditions pushed up prices of food. However, CPI inflation is likely to remain within the target range of 3.5-5.5 percent going forward, according to the bank.
The central bank said that it will strengthen its monetary and macroprudential policy mix to bring the current account deficit to "sustainable" levels. Bank Indonesia forecasts an improvement in the current account balance in the first quarter of 2013 primarily due to better export performance.
It also vowed to strengthen policy coordination with the government to manage domestic demand to be consistent with the objectives of managing external stability, achievement of the inflation target, and maintaining sustainable economic growth.
The bank said it expects the economy to grow 6.2 percent in the first quarter of 2013. In 2013, the gross domestic product is seen expanding between 6.3 percent and 6.8 percent.
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