JAKARTA: Bank Indonesia kept its benchmark reference rate steady for a fifth straight month, as expected, helped by a narrowing in the country's current-account deficit.
Southeast Asia's largest economy appears to have turned a corner this year as confidence returns to the rupiah on signs the economy is improving.
Its trade balance reverted to surplus in February and inflation has continued to moderate.
Analysts expect policymakers will likely keep policy unchanged for now as inflation also becomes less of a concern. 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 central bank also held the deposit facility rate (FASBI) and lending facility rate at 5.75 percent and 7.50 percent, respectively.
Bank Indonesia will release a full statement on its policy decision later on Tuesday.
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.
Annual inflation slowed in March to 7.32 percent, from near 10 percent in mid-2013 after fuel price hikes.
The central bank has repeatedly expressed concern though over surging core inflation, which is an indicator of the longer-term trend in consumer prices. After the rate decision, the rupiah stood at 11,290 per dollar, up from Monday's 11,304. It has gained 7.7 percent since the start of 2014 to become the best performing Asian currency so far this year.
Comments
Comments are closed.