REPUBLIKA.CO.ID, JAKARTA - Indonesia's central bank on Tuesday held its key interest rate steady at 7.50 percent, as widely expected, at its last policy meeting before Joko Widodo becomes president on Oct. 20.
Bank Indonesia (BI) said the current benchmark rate BIPG - which has held since November 2013 - is "adequate" for keeping inflation within the target and for the central bank's effort to rein in the current account deficit, which topped 4 percent of gross domestic product in the second quarter.
All 16 analysts in a Reuters poll had projected no change to the benchmark rate. Also on Tuesday, BI held its overnight deposit facility rate, known as Fasbi, at 5.75 percent and the lending facility rate at 7.50 percent.
For BI, there's no need to raise rates at present, and no room to cut them, especially ahead of next year's anticipated increase in U.S. interest rates. Indonesia, with its large current account deficit, is vulnerable to capital outflows.
"We believe concerns about the current account will continue to outweigh worries about slowing growth," said Gareth Leather, Asia economist of Capital Economics.
Most analysts expect rates to be kept on hold for the rest of 2014, unless Widodo quickly raises domestic fuel prices, which would push up the inflation rate. In mid-2013, after fuel prices were hiked, inflation spiked to nearly 10 percent but it has been contained this year.