Indonesia's central bank kept its key interest rate unchanged on Thursday and said monetary policy remains "cautiously accommodative" though it is keeping an eye on inflation pressures. Bank Indonesia (BI) kept its benchmark policy rate at 4.75 percent, as predicted by all 20 analysts surveyed in a Reuters poll.
BI has been hoping a series of monetary policy easings last year, including six rate cuts totalling 150 basis points, will boost lending and growth this year. Governor Agus Martowardojo told reporters on Thursday that room now for further easing is "not too wide", citing global risks.
Economic growth last year was 5 percent, as BI predicted, but the fourth quarter pace was slightly below expectation. The central bank said it now expects 2017 growth of slightly below the midpoint of its 5.0-5.4 percent range. "The case for monetary easing has weakened amid expectations of firmer domestic demand, higher inflation, and normalisation of US rates," ANZ said, adding that it continues to expect BI to hold the key rate throughout 2017.
Prior to Thursday, Martowardojo said the central bank this year will ease rules on how banks manage reserve requirement ratios on a day-to-day basis, which could provide banks with more liquidity for credit, possibly lifting the growth rate. Strong January trade data, announced earlier on Thursday, showed good prospects this year, but Southeast Asia's largest economy still faces some headwinds.