Indonesia's central bank on Thursday kept its benchmark interest rate unchanged at a record low for the fourteenth successive month even as headline inflation continued to rise. The decision was in line with economists forecast.
The Bank Indonesia kept the benchmark interest rate at 5.75 percent, as it did at each of the previous thirteen rate-setting sessions.
The central bank said it expects the economy to expand 6.2 percent in the first quarter, supported mainly by strong domestic demand. In the whole of 2013, economic growth is projected lead to a lower limit of the range of 6.3-6.8 percent. The bank forecasts the current account deficit to decline in the first quarter.
"We believe the most likely outcome is for interest rates to be kept on hold for the rest of the year. Nevertheless, there is a chance that BI may hike interest rates in response to a combination of a worsening in the current account position, and continued strong credit growth," Capital Economics Asia Economist Gareth Leather said.
"But, provided inflationary pressures remain contained, the possibility of a rate hike is relatively small."
Indonesia's consumer price inflation increased to 5.31 percent in February from 4.6 percent in January, and is currently hovering near the upper end of the 3.5-5.5 percent target range.
Inflationary pressure is expected to ease and remain subdued in the range of the target in 2013, the central bank said.
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