JAKARTA (March 20): Indonesia's central bank held key benchmark rates steady on Wednesday, as forecast, and reaffirmed its conviction that monetary policy could be eased in the second half around the time the US Federal Reserve (Fed) is expected to cut rates.

Bank Indonesia (BI) kept the benchmark seven-day reverse repurchase rate at 6.00%, matching predictions by all 31 economists polled by Reuters. Its two other main policy rates were also kept unchanged.

The decision was in line with efforts to maintain stability of the rupiah and control inflation, Bank Indonesia Governor Perry Warjiyo said.

The rupiah has lost around 1% in the past week, with Monday's drop the biggest since late January. It was unchanged after BI's announcement, which followed the Bank of Japan's (BOJ) landmark decision on Tuesday to end years of negative interest rates in a move that could affect Japanese funds invested abroad.

BI's policy decision also came ahead of the Fed's policy review expected later on Wednesday. The US central bank is not expected to cut borrowing costs this week, but markets will closely watch Fed Chair Jerome Powell's comments on when it might start to ease monetary policy.

BI maintained its view the Fed will reduce rates in the second half of the year, Warjiyo said, while adding he is not seeing much impact from BOJ's shift.

"We don't see that policies by BOJ will have a big impact on capital flows or exchange rate, because movements of many currencies are still determined by the US dollar that is still quite strong," Warjiyo said.

He reiterated that BI sees room to cut interest rates in the second half of this year, with inflation seen remaining within target through to 2025, even as analysts say Southeast Asia's largest economy is in need of stimulus amid falling exports.

Some economists expected BI to take its cue from the Fed on the timing and magnitude of monetary easing, in order to keep a certain yield spread between assets in Indonesian rupiah and US treasury yields.

"There is considerable uncertainty in the pipeline with regards to the direction of global interest rates, particularly for the US Fed as markets continue to delay expectations of a start to the rate easing cycle," Radhika Rao, a DBS economist said.

BI on Wednesday also kept Indonesia's economic growth outlook for 2024 in a range of 4.7% to 5.5%.