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 held its benchmark rate at a record low 5.75 percent for an eighth consecutive month, as forecast, and said the economy is still growing well though it conceded domestic demand was not as high as expected.

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

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

Earlier on Thursday, South Korea's central bank cut interest rates for the second time in four months, to deal with the global slowdown, and Australia and Brazil have also made recent cuts.

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

, which has been weakened by trade imbalances. The rupiah is the worst performer in the region, weakening about 5.5 percent against the dollar in 2012.

Bank Indonesia Governor Darmin Nasution said the current policy rate "remains consistent with the low and manageable inflationary pressures."

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

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

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The benchmark rate has been steady since a 25 basis point cut in February. There were cuts of 75 bps in October and November.

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

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

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

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

(Editing by Matthew Bigg and Richard Borsuk)

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Keywords: INDONESIA ECONOMY/RATE