Bank Indonesia, the country's central bank, kept its benchmark interest rate unchanged at 5.75 percent on Thursday in anticipation of inflationary pressure, with the government planning to raise subsidised fuel prices.
"It is considered consistent with the inflationary pressure... and conducive to boosting economic growth amid the global slowdown," a banks spokesman said after a board of governors meeting.
The central bank's latest decision came after on-year inflation eased to 3.56 percent in February, from 3.65 percent a month earlier. BI lowered its overnight interest rate by one-quarter of a percent last month, after keeping it unchanged since November.
The government plans to raise the price of fuel next month by Rp 1,500 (16 cents) per litre, or about one-third. The plan is currently awaiting approval from parliament.
The bank said that the impact of the fuel-price hike would be a "one-time shock" and that inflation would ease back.
Indonesians have enjoyed heavy subsidies on fuel for years. The last price hike was in May 2008, which sent inflation soaring to 10.38 percent year-on-year that month.
Source: AFP Asian Edition