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UPDATE 1-Indonesia's central bank holds rate at 5.75 pct

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By Rieka Rahadiana and Adriana Nina Kusuma

JAKARTA, Oct 11 (Reuters) - Indonesia's central bank heldits benchmark rate at a record low 5.75 percent for an eighthconsecutive month, as forecast, and said the economy is stillgrowing well though it conceded domestic demand was not as highas expected.

All 19 economists polled by Reuters had expected Thursday'shold, and most of them expect the rate

to stand throughyear-end as inflation has eased and domestic demand has beendriving economic growth of at least 6 percent a year.

Earlier on Thursday, South Korea's central bank cut interestrates for the second time in four months, to deal with theglobal slowdown, and Australia and Brazil have also made recentcuts.

Indonesia, which cut rates by 100 basis points in late 2011and early 2012, has not needed to cut them since then to supportgrowth. It has had higher priorities on containing inflation andsupporting the rupiah

, which has been weakened by tradeimbalances.The rupiahis the worst performer in the region,weakening about 5.5 percent against the dollar in 2012.

Bank Indonesia Governor Darmin Nasution said the currentpolicy rate "remains consistent with the low and manageableinflationary pressures."

The governor, who last month said Indonesia could grow 6.4percent in 2012, on Thursday gave a range of 6.1-6.5 percent. Healso said that he expects the economy to expand 6.3-6.7 percentin 2013 rather than the 6.6 percent he forecast in September.

Despite a bleak global economic outlook, Southeast Asia'sbiggest economy posted annual growth at 6.4 percent in thesecond quarter this year, driven by strong domestic consumption.

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The benchmark rate has been steady since a 25 basis pointcut in February. There were cuts of 75 bps in October andNovember.

Daniel Martin, economist at Capital Economics in London,said a rate cut is unlikely until 2014 as GDP growth remainsstrong and "Indonesia is well-placed to withstand the impact ofweaker global demand."

He also said BI may hike rates next year in response torapid credit growth and the worsening current account, butinflationary pressures are "relatively mild."

Retail sales rose at a slower pace in August but stillclocked 11.4 percent growth from a year earlier, while thecentral bank's consumer confidence index rose in September.

Easing food prices after Eid al-Fitr had pushed annualheadline inflation in September to 4.31 percent from 4.58percent in August. There should be no problem keeping inflationwithin Bank Indonesia's target of 3.5 to 5.5 percent atyear-end.

(Editing by Matthew Bigg and Richard Borsuk)

((rieka.rahadiana@thomsonreuters.com)(+6221 3199 7170)(ReutersMessaging: rieka.rahadiana.thomsonreuters.com@reuters.net))

Keywords: INDONESIA ECONOMY/RATE