Indonesia’s central bank will probably extend a pause in raising interest rates after inflation slowed for a second month in March.

Bank Indonesia will keep its benchmark reference rate at 6.75 percent, according to all 18 economists surveyed by Bloomberg News. The central bank is due to release its decision in Jakarta tomorrow.
Indonesia refrained from boosting borrowing costs last month after increasing the key rate in February for the first time in more than two years, saying a strengthening currency is helping reduce price gains. That prompted economists at HSBC Holdings Plc to question the central bank’s commitment to fight inflation, and contributed to a drop in stocks amid concern a prolonged pause may prompt more aggressive tightening later.
“The central bank still prefers to wait and watch even though there are inflation risks in the pipeline,” said Vishnu Varathan, an economist in Singapore at Capital Economics (Asia) Pte. “The rupiah’s appreciation has helped reduce imported inflation but there are still domestic price pressures that need to be addressed. They have to raise rates sooner rather than later as just tightening via the exchange-rate channel will not be enough.”
The Indonesian rupiah is the biggest gainer in Asia this year, climbing about 3.9 percent, according to data compiled by Bloomberg. Consumer prices in Southeast Asia’s largest economy rose 6.65 percent last month from a year earlier, slower than the 6.84 percent pace in February.
(Source: Bloomberg)