(Adds details, economists' comments)
* BI benchmark rate unchanged at 4.75 pct, as expected
* Indonesia's currency, stock market up after Fed rate hike
* Some analysts see BI on hold for rest of 2017
By Hidayat Setiaji and Gayatri Suroyo
JAKARTA, March 16 Indonesia's central bank held
its key policy rate unchanged on Thursday, saying it wants to
maintain stability amid global uncertainties and will monitor
the impact of higher U.S. rates.
Bank Indonesia (BI) kept its benchmark policy rate
at 4.75 percent for the fifth consecutive meeting.
All 20 analysts in a Reuters poll had forecast no change.
"The decision is in line with BI's efforts to maintain
macroeconomic and financial stability amid rising global
uncertainty," the central bank said in a statement after the
U.S. Federal Reserve raised rates.
"Our position is ready for everything, whether we are forced
to raise (rates) or if there is room to cut (rates)," Dody Budi
Waluyo, Bank Indonesia's executive director of economic and
monetary policy, told reporters, adding that the central bank's
stance remains cautiously accommodative.
The Fed increased rates for the second time in three months
on Wednesday, signalling that it was on course to raise rates
again which may spark outflows from emerging markets.
Southeast Asia's largest economy has benefitted from
stronger global growth and improved commodity prices that have
boosted exports and narrowed its current account deficit. But
rising inflation and capital outflow pressures could present new
challenges as the economy recovers.
Indonesian markets responded positively to the Fed's
decision on Thursday. The rupiah was up slightly, while
the main stock index rose 1.58 percent.
BI said it was monitoring monetary policy tightening in some
developed countries, the impact of rising U.S. rates on the
dollar, the Brexit process and growing populism in some European
At home, the central bank is keeping an eye on price
pressures from government plans to remove some subsidies. Annual
inflation in February was 3.83 percent, the highest in 11
months, though it remained inside BI's target band.
BI has been hoping a series of monetary policy easings last
year, including six rate cuts totalling 150 basis points, will
boost economic activity this year. On Thursday, it said it
expects "relatively strong" growth in the first quarter of 2017.
Economic growth last year was 5 percent, as BI predicted,
but the fourth quarter pace was slightly below expectation.
Capital Economics said the economy could do with further
support from the central bank but the uncertain outlook for the
rupiah was likely to deter BI from loosening policy.
"Indonesia's relatively high level of foreign-currency
denominated debt makes it vulnerable to falls in the rupiah,"
economist Gareth Leather said.
ANZ agreed that rates would likely be on hold for the rest
of the year.
"Considering that BI is expecting growth to be firmer and
intends to be proactive in inflation management, we expect it to
remain on hold through 2017," ANZ said.
(Additional reporting by Nilufar Rizki and Fransiska Nangoy;
Editing by Jacqueline Wong)