Reuters - Bank Indonesia kept its benchmark reference rate steady for a fifth straight month, as expected, helped by a narrowing in the country's current-account deficit.

Southeast Asia's largest economy appears to have turned a corner this year as confidence returns to the rupiah on signs the economy is improving. Its trade balance reverted to surplus in February and inflation has continued to moderate.

Analysts expect policymakers will likely keep policy unchanged for now as inflation also becomes less of a concern. Indonesia has held rates steady this year while other major emerging economies were forced to raise them to fend off outflows.

"Provided inflation falls back as expected and there is no renewed pressure on the rupiah, the next move in rates is likely to be downwards, but probably not before the end of the year," said Krystal Tan, Asia economist at Capital Economics.

All 15 analysts in a Reuters poll had expected the policy rate to be kept on hold as pressures had eased on both the current-account deficit and the rupiah.

The central bank also held the deposit facility rate (FASBI) and lending facility rate at 5.75 percent and 7.50 percent, respectively.

Bank Indonesia will release a full statement on its policy decision later on Tuesday.

The central bank last month trimmed its growth forecast to 5.5-5.9 percent this year from 5.8-6.2 percent, despite an increase in spending for legislative and presidential elections.

Indonesia has reaped from a recovery in commodity prices, mainly coal and crude palm oil, which helped turn its trade balance in February to a surplus of $790 million from a $450 million deficit the previous month.

Annual inflation slowed in March to 7.32 percent, from near 10 percent in mid-2013 after fuel price hikes.

The central bank has repeatedly expressed concern though over surging core inflation, which is an indicator of the longer-term trend in consumer prices.

After the rate decision, the rupiah stood at 11,290 per dollar, up from Monday's 11,304. It has gained 7.7 percent since the start of 2014 to become the best performing Asian currency so far this year.

MORE FUEL HIKES TO COME

A Bank Indonesia survey on Friday showed that consumers were more optimistic about the economy in the next six months but remain concerned over the political and economic outlook after presidential elections in July.

The survey also found that consumers see the possibility of further rises in fuel prices and electricity tariffs this year.

The government plans to propose revising the budget in May, after a new parliament is formed, with possible cuts to allocation for fuel subsidies that may force the central bank to raise its policy rate to mitigate inflation from rising prices.

Bank Indonesia Senior Deputy Governor Mirza Adityaswara said fuel subsidies in the G20 economy should be better managed to control inflation and encourage the industry to develop alternative energy sources.

Indonesia has been struggling to ease its current-account deficit and improve structural reform, which could hurt economic growth.

Bank Indonesia has estimated that the current-account deficit will fall under 3 percent of gross domestic product this year, compared with 3.3 percent in 2013.

The widest measure of the flow of goods, services and money in and out of the country hit a record of 4.4 percent in the second quarter of last year.

Analysts in a Reuters poll were mixed over when the central bank would change monetary policy. Some expect a rate rise as early as the second quarter, while others suggested the central bank would hold or even cut rates if trade improves and no adjustment is made in the fuel subsidy policy.