JAKARTA: Indonesia's central bank is widely expected to keep its benchmark interest rate unchanged on Thursday, as it continues to focus on stability and growth as US rates rise.
Central bank officials have repeatedly said room for further easing of monetary policy is limited, but this has been helped in part by a lack of inflationary pressures.
Bank Indonesia (BI) has held interest rates steady for the past six meetings. It surprised markets by cutting the rate by 25 basis points last August and again in September, in efforts to boost lending and business activity.
At the conclusion of its review on Thursday, all 14 analysts in a Reuters poll expect the central bank to continue to hold the 7-day reverse repurchase rate at 4.25 percent.
The deposit facility and lending facility rates are also seen unchanged, at 3.50 percent and 5.00 percent, respectively.
Growth in Southeast Asia's largest economy has struggled to exceed 5 percent in recent years, well below the 7 percent President Joko Widodo pledged to deliver while campaigning in 2014. A collapse in commodities prices just as he took office and weak consumer demand have dragged on the economy.
"To ensure stability in the bond market, in a period of tightening by the US Federal Reserve, the current neutral stance is appropriate," ANZ said in a note dated April 13, adding that the stance may be maintained throughout 2018.
Some economists also cited limited inflationary pressure as the main reason for BI to stay on hold.
Indonesia's annual inflation rate was 3.40 percent in March, slightly higher than February's but still below the midpoint of BI's target range for the year of 2.5-4.5 percent.
Josua Pardede, Bank Permata's economist in Jakarta, said the current level was enough to anchor expectations that inflation will peak in May and June, when demand increases ahead of and during the Muslim fasting month of Ramadan and the festival of Eid al-Fitr, marking the end of fasting.
Of the handful of analysts with longer-term views in the poll, two forecast BI would raise the benchmark rate 50 basis points some time this year while two others predicted it would remain on hold. Capital Economics said BI would cut rates again this year to support growth but did not say by how much.
BI officials have said the central bank prefers to tweak macroprudential policy instead of changing interest rate levels to rev up economic growth for now. It introduced a set of new rules on bank reserve requirements this month, aimed at giving banks greater flexibility in managing liquidity and credit.
BI's outlook for GDP growth this year is between 5.1 percent to 5.5 percent. It expects a growth rate of 5.1 percent in the first quarter, slightly below the 5.2 percent pace Indonesia recorded in the final quarter of 2017.
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