Indonesia's central bank holds benchmark rate at 7.50%, as expected

 Bank Indonesia kept its benchmark policy interest rate unchanged as it tries to strike a balance between currency stability and economic growth.
Bank Indonesia kept its benchmark policy interest rate unchanged as it tries to strike a balance between currency stability and economic growth. PHOTO: BLOOMBERG

JAKARTA (REUTERS, BLOOMBERG) - Indonesia's central bank kept its benchmark policy interest rate unchanged on Thursday, saying the level was consistent with efforts to manage inflation this year and in 2016.

Bank Indonesia was widely expected to keep its key rate on hold, according to 18 analysts in a Reuters poll, as it tries to strike a balance between currency stability and economic growth.

The rupiah, trading at 17-year lows, is emerging Asia's second-worst performing currency. Economic growth was 4.67 per cent in the second quarter, the slowest since 2009.

The decision underscores the constraints Indonesia's policy makers face in managing a faltering economy amid the risk of capital outflows and market volatility, with the U.S. Federal Reserve hours away from a closely watched decision that could end almost seven years of near-zero interest rates.

While government spending has been slow to take off, the central bank's ability to provide monetary stimulus is limited by the rupiah, which has fallen more than 14 percent against the dollar this year.

"In these kinds of conditions, they have little space to move," said Juniman, chief economist at PT Bank Internasional Indonesia in Jakarta. "The problem is with the rupiah and the uncertainty around the Fed."