JAKARTA (May 25): Indonesia's central bank kept its policy interest rates unchanged for a fourth straight meeting on Thursday (May 25), as expected amid cooling inflation, but its governor warned a slowdown in investment may hit economic growth for the rest of 2023.

Bank Indonesia (BI) left unchanged its benchmark seven-day reverse repurchase rate at 5.75%, as unanimously predicted by 31 economists surveyed by Reuters. Its two other policy rates were also kept unchanged.

With inflation in Southeast Asia's largest economy already easing to just above the central bank's target range, some analysts said BI may soon begin to consider easing monetary policy to support growth amid slowing exports.

Asked about when BI would consider a rate cut, Governor Perry Warjiyo said its main concern was high global uncertainties, especially related to US debt ceiling negotiations and possible spending cuts there.

"This is why the focus of our policy is stabilising the rupiah to mitigate imported inflation and any spillover impact," Warjiyo told a news conference.

However, BI appeared concerned about domestic growth. While it kept its 2023 economic growth forecast within a range of 4.5% to 5.3%, it no longer mentioned that it was expecting a "bias towards the upper end" — which it had mentioned in its April statement.

Warjiyo said first-quarter GDP data showed a slowdown in growth of construction and real estate investment and he cited a trend of investment typically slowing ahead of elections. Indonesians are due to hold general elections in 2024.

Overall economic growth picked up slightly to 5.03% in the first quarter, thanks to consumer and government spending offsetting a slowdown in exports and investment, data showed earlier this month.

Meanwhile, Indonesia's annual inflation cooled to 4.33% in April, down from last year's peak of 5.95%, after BI raised interest rates a total of 225 basis points between August and January.

BI expects the headline inflation rate to return to within a 2% to 4% target range in the next quarter and the core inflation rate to remain within the same range throughout 2023.

The rupiah, which remained emerging Asia's best performing emerging currency despite weaknesses in recent days, did not move much after BI's policy announcement.

"Bank Indonesia extended its pause on rates, finding a balance in midst of easing inflation but softer currency as the latter faces renewed pressure from uncertainty over the US debt ceiling negotiations," said DBS Bank's economist Radhika Rao.

She expected BI to bring the benchmark down to 5% by year end, but for the central bank to remain neutral in the near term.

Josua Pardede, chief economist of Bank Permata, said the tone of BI's statement indicated it would maintain interest rate levels until end of year.

Economists in a Reuters poll conducted before Thursday's policy announcement predicted BI would stand pat for the rest of the year and start to cut rates early in 2024.