As inflation shows signs of subsiding and the rupiah gains on the momentum, the central bank is likely to continue raising its benchmark interest rate moderately, analysts say, giving room for the economy to grow better this year.

The overall forecast among analysts is that Bank Indonesia will raise its key BI Rate by only 25 basis points to 13 percent, with Bank International Indonesia (BII) chief economist Ferry Latuhihin estimating the rate may even be maintained at its current level of 12.75 percent.

"I see no reason for BI to raise the rate again," he told The Jakarta Post. "Inflation can be said to be under control, while the rupiah has also been strengthening lately."

BI's board of governors is slated to hold its monthly meeting on Monday. The board is expected to present its latest assessment on the economy and announce relevant monetary policies, including the BI Rate.

BI last hiked the rate by a lower-than-expected 0.5 percentage point in December, indicating an intention to tame inflation without overly affecting economic growth.

The central bank has raised the rate six times since July to more aggressive levels, to support a slumping rupiah amid rising oil prices and to tackle surging inflation after the government doubled fuel prices.

Last year's inflation ended at 17.11 percent -- the highest since 2001 -- but consumer prices fell by 0.04 percent in December, after rising by 1.91 percent in March and 8.71 percent in October. The rupiah picked up on December's positive deflation sentiment, although analysts say the currency may still be at risk due to a lack of underlying transactions to support it.

With inflation expected to end at only 7 percent this year, Ferry said the current BI Rate was more than enough to provide an attractive spread to investors holding central bank SBI promissory notes and government bonds.

The BI Rate acts as a reference for the central bank's SBI one-month and three-month promissory notes, the rate of which stood at 12.74 percent and 12.91 percent, respectively, during last week's auction.

It also affects the interest rates of bank loans, making it costlier for business expansion if too high. Indonesia's economy had indeed been slowing down last year amid high inflation and interest rates, from 6.2 percent in the first quarter to 5.3 percent in the third quarter.

However, Ferry warned that BI might have to raise the rate again if the government increases electricity rates and civil servant salaries this year, both of which would contribute to another rise in inflation.

Bank Mandiri chief economist Martin Panggabean said BI might keep its key rate at its current level or slightly raise it to 13 percent during Monday's meeting, largely depending on its January inflation outlook.

Standard Chartered economist Fauzi Ichsan also gave a 13 percent figure, which would be in line with BI's tight-biased monetary policy.

"BI must still give out a message (to the markets) that it is being consistent in containing inflation," he said, adding that the hike may even be higher, in reference to a possible rise in the U.S. Federal Reserve rate by 50 basis points to 4.75 percent.

State Minister for National Development Planning Paskah Suzetta was quoted by Antara as saying that BI should not raise the rate again but begin lowering it in the next three months to help stimulate economic growth.