The Indonesian central bank on Wednesday kept its benchmark interest rate unchanged at 6.5 percent to support the economic recovery, but it may raise it in the next move to contain high inflation pressure, a statement from the bank said.
"The decision is taken after considering that the rate at that level (6.5 percent) is still consistent with the achievement of the inflation target of 5 percent plus minus 1 percent in 2010," the statement said.
The decision was in line with expectation of seven analysts surveyed by Xinhua.
"With the target of inflation this year, it is suitable that the bank does not change the rate," said Purbaya Yudhi Sadewa an analyst from
Danareksa.
The Southeast Asia's largest economy registered an inflation rate of 2.78 percent in December, the lowest ever in almost a decade, giving the central bank more time before raising the rate, the Statistic Agency reported earlier on Jan. 4.
"The bank sees that risk of inflation pressure would not appear at least in the first semester of 2010. The rate is considered still conducive for the efforts to strengthen economic recovery, to maintain financial stability and to push intermediary of banks, " it said.
The inflation pressure was forecast to rise this year as the demands and prices of commodity at the international market will increase.
Analysts also predicted that the bank would start to raise the rate at the end of the second quarter of this year and the rate would reach 7.5
percent at the end of this year.
"The rate hike may start at the end of Q2 about 25 basis points. For the whole year it would reach 7.5 percent," said Fauzi Ichsan an analyst from Standard Chartered.
The central bank stopped reducing rate last August after cutting the borrowing rate by 300 basis points in nine straight months to protect the country's economy from the influence of the global crisis.
Indonesia registered a high economic growth in the region during the crisis, while other countries suffered from strong contraction.
In the future, the bank would focus its monetary policy on maintaining the stability of macro economy and work to speed up the economic recovery, the statement said.
Indonesian Finance Minister Sri Mulyani Indrawati has said the country's economy will grow at 5.5 percent this year, higher than the target of last year of 4.3 percent.