Bank Indonesia keeps rate unchanged at 4.75 percent

Bank Indonesia keeps rate unchanged at 4.75 percent

Indonesia's central bank, wary of risks including a "big chance" U.S. interest rates will rise in June, left its benchmark interest rate unchanged for a seventh month as inflation heads closer to the top of the target band.

The bank governor board meeting chose to hold seven-day reverse repo rate at 4.75 percent despite demand of foods and clothes is projected to increase prior to Islamic fasting month of Ramadhan that falls at the end of this month.

The board meeting agreed to keep deposit facility rate and lending facility rate respectively 4 percent and 5.5 percent, he said.

Bank Indonesia (BI) will keep its Seven-Day Reverse Repo Rate ( 7DRRR ) unchanged at 4.75 percent for the eighth time in a row since October 2016, citing high potential inflation and external pressures amid the United States Federal Reserve's plan to raise interest rates in June.

Capital Economics said that despite the economy's "poor outlook", a rate cut is "unlikely this year", partly because of anticipated hikes by the Fed and the possibility Indonesian inflation - at a 13-month high in April - will go higher. Going forward "policy coordination between the government and Bank Indonesia in managing inflation will continue to be strengthened", it said.

The central bank is forecasting economic growth of 5.1 per cent in the second quarter and above 5.2 per cent in the following two quarters. It sees expansion of 5 per cent to 5.2 per cent next year. The move may spur credit growth, adding the equivalent of 0.4 per cent to 0.5 per cent of gross domestic product, or close to 1 percent of broad money to the banking system, according to Credit Suisse Group.