Bank Indonesia on Thursday left its benchmark policy rate unchanged for a fourth consecutive policy meeting, as largely expected. Indonesia's central bank kept the 7-day reverse repurchase rate at 4.75 percent and also held its two other rates, which act as the floor and ceiling of the overnight interbank money market , at 4 percent and 5.50 percent, respectively.

The case for monetary easing has weakened amid expectations of firmer domestic demand, higher inflation, and normalisation of US rates. The central bank expects inflation control to be more challenging in 2017, which warrants a neutral policy stance. Bank Indonesia is turning cautious as inflation pressures mount.

Governor Agus Martowardojo said on Feb. 3 the central bank is monitoring the impact of U.S. fiscal and trade policies, adding that “if previously the stance was an easing bias, now we’re cautious about easing.”

"Indonesia's headline inflation is likely to periodically test the upper bound of BI's inflation target in H2 2017. We thus maintain our view that BI will remain on hold throughout 2017, keeping the 7-day reverse repo rate at 4.75%." said ANZ in a report to clients.