Indonesia's central bank Bank Indonesia on Tuesday decided to hold its benchmark interest rate at 3.50 percent.

Erwin Haryono, executive director of the bank' Communication Department said the bank's Board of Governors meeting held on Monday and Tuesday also decided to keep the deposit facility rate unchanged at 2.75 percent and the lending facility rate at 4.25 percent.

"This decision is consistent with the forecast of inflation to remain low, as well as efforts to maintain the stability of the rupiah exchange rate and accelerate the economic recovery," Haryono said.

Haryono said the decision was also based on the improving economic growth, as seen in a contraction of 0.74 percent year on year in the first quarter of this year, compared to a growth of negative 2.19 percent in the fourth quarter of last year.

Meanwhile, the rupiah exchange rate strengthened by 0.63 percent point to point on May 24, and 1.42 percent on the average compared to the level in April, largely as a result of the inflow of foreign capital into the domestic financial market.