* BI benchmark rate kept at 4.75 pct, as expected
* C.bank says economic indicators are strong
* Loan growth slows in Dec, despite past rate cuts
* Governor: Policy remains 'cautiously accommodative'
By Hidayat Setiaji and Gayatri Suroyo
JAKARTA, Feb 16 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
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 U.S. 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.
FACING SOME HEADWINDS
Strong January trade data, announced earlier on Thursday,
showed good prospects this year, but Southeast Asia's largest
economy still faces some headwinds.
Loan growth continues to be sluggish, even after all the
2016 rate cuts. In December, loans grew 7.9 percent from a year
earlier, a slowing from November's 8.5 percent increase.
Some analysts said uncertainty stemming from a heated,
contentious election for governor of Jakarta could dent growth.
A private quick count Wednesday's vote indicated there will need
to be run-off election in April.
A growing number of analysts are now saying BI's next
interest rate move might be a raise, due to higher inflation
projection and anticipated U.S. interest rate hikes by the
Annual inflation in January was 3.49 percent, and BI has
said it may top 4 percent later this year. On Thursday, it
reiterated its belief that inflation in 2017 will remain in its
3-5 percent target range.
The rupiah has strengthened 1.1 percent this year
against the dollar, following a 2.6 percent appreciation during
But despite that and favourable portfolio inflows into the
country, Natixis economist Trinh Nguyen said BI is "unlikely to
take chances and cut rates", due to external factors beyond
(Additional reporting by Nilufar Rizki and Fransiska Nangoy;
Editing by Richard Borsuk)