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Analysts over the weekend questioned Bank Indonesia’s commitment to fighting inflation after it held off on raising its key rate, with some saying it was behind the curve on facing price pressures.

“Eighteen months of record-low interest rates, one single 25 basis-point hike and then pause?” said Wellian Wiranto, an economist at HSBC Holdings in Singapore. “As much as they continue to posture toward future tightening, an immediate hike [on Friday] would have done a lot in strengthening their credibility.”

He added that a tamer-than-expected inflation report last week had warranted a pause, in Bank Indonesia’s view. Annual inflation eased in February to 6.84 percent from 7.02 percent in January thanks to the rice harvest easing pressure on volatile food prices.

BI said keeping the benchmark rate at 6.75 percent after a quarter-point hike the month before, the first tightening since September 2008, should not be seen as a U-turn in policy, with the bank committed to managing high inflationary pressures.

Analysts said the bank’s latest move showed it would be “reactive” rather than “proactive” in weighing inflation data.

“It’s too bad. We got it wrong,” Wellian said. “We thought Bank Indonesia was finally and seriously gearing up to attain the label of being ‘on the curve’ when it comes to fighting inflation. Last month’s hike was a good sign in that direction, and it has never done a move-and-pause regime before.

“We see it as a golden opportunity missed. After all, nothing builds credibility more than if they were to hike rates when inflation is not snarling, rather than wait to be forced into tightening when the inflation beast bares its fangs.”

The central bank said it was optimistic headline inflation could be contained at 4 percent to 6 percent this year and 3.5 percent to 5.5 percent in 2012 with the help of monetary policy and a government commitment to holding down food prices.

Wellian still sees upside risks to inflation far outweighing the downside. “In the immediate months, the onset of the harvest season is likely to continue to offer a dampening effect on headline inflation,” he said. “Overall, higher oil prices will present another substantial additional cost to producers here, whose fuel consumption is not subsidized.”

Gundy Cahyadi, an analyst at Singapore-based Idea Global, said the central bank “needs to be seen a little tougher than they are right now in combating inflation. … Based on our inflation projection for the year [about 6.8-7.0 percent average for the year now], we continue to see the need for higher interest rates, especially given the strength still prevalent in domestic demand.”

Helmi Arman, an economist with Bank Danamon, said BI apparently wanted to manage these expectations without significantly disrupting Indonesia’s growth momentum by raising rates.

“This is why we don’t think that aggressive rate hikes are forthcoming, especially as BI has been keen to stress the use of complementary non-interest rate tools [e.g. the exchange rate] in their conduct of monetary policy,” he said. “We think the peak for the policy rate will be at 7 percent this year.

“So with just one more hike to go, policy makers will want to make their last bullet count. The next rate hike will likely be carried out after the harvest season ends and food prices are back on the rise — which could be in July, if not slightly earlier.”

The central bank adjusts its benchmark rate to support an economy that is forecast to grow by 6.5 percent this year. Bank Indonesia cut its policy rate by 3 percentage points between December 2008 and August 2009 to shield the economy from the financial crisis.