By Nilufar Rizki and Gayatri Suroyo

By Nilufar Rizki and Gayatri Suroyo

JAKARTA (Reuters) - Indonesia's central bank, concluding a policy meeting shortly after the Federal Reserve raised U.S. interest rates, on Thursday held its benchmark steady and said it was on guard against "reversals" of capital flows into the country.

The main policy rate <IDCBRR=ECI> was maintained at 4.75 percent, as predicted by all 23 analysts in a Reuters poll. The two other policy rates were also kept unchanged.

Juda Agung, a Bank Indonesia (BI) executive director, declined to assess to the Fed's projection of three rate hikes next year, saying there is "high probability" the U.S. central bank will later change its plan.


But he said Indonesia is better equipped to face any rate hike than during the 2013 "Taper Tantrum".

Some economists said that as BI has cut its benchmark 150 basis points this year and has to support the rupiah <IDR=> in the wake of the Fed's moves, the current benchmark might remain unchanged for some time.

"We see no need for further monetary easing in the coming months and thus expect BI to maintain its policy stance in 2017," ANZ wrote.

The rupiah weakened 0.77 percent in Thursday trading, in line with emerging market currencies' decline against the dollar, as Fed's hawkish message reinforced the outlook for further dollar strength. [EMRG/FRX]

Jakarta's main stock index <.JKSE> touched its lowest in nearly two weeks with financial and consumer stocks accounting for most losses. The benchmark 10-year government bond yield <ID10YT=RR> nudged up by 10 basis points to 7.909 percent.


BI said it would maintain the rupiah exchange rate to make sure it reflects the currency's fundamentals, especially facing uncertainty in U.S. fiscal and trade policies and China's financial sector policy.

The central bank's cuts this year have been aimed at boosting the growth rate, which fell last year to 4.8 percent, the lowest since 2009.

But banks, concerned by rising bad loans, have not channeled the rate cuts fast enough and credit growth has not accelerated as quickly as BI wanted.

BI's Agung said companies have "far better" balance sheets this year compared with 2015, which should make banks more confident about extending loans to them.

Annual economic growth was 5.02 percent in the third quarter, slowing from April-June, suggesting the economy could struggle to mount a solid rebound.

BI expects Southeast Asia's largest economy to post 5.0 percent growth in the fourth quarter, making the full-year 2016 pace also 5.0 percent.

For 2017, BI's outlook is 5.0-5.4 percent.

Indonesia's annual inflation was 3.6 percent in November, well inside BI's 3-5 percent target range. The central bank forecast end-year annual inflation rate as 3-3.2 percent, while next year's rate was expected to remain inside its 3-5 percent target range.

(Additional reporting by Hidayat Setiaji and Cindy Silviana; Editing by Richard Borsuk)

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