Indonesia cuts key interest rate for third month

06-Feb-2009 Intellasia | Bloomberg | 7:01 AM Print This Post

Indonesia’s central bank lowered its benchmark interest rate for a third straight month to help cushion Southeast Asia’s biggest economy from a global recession.

Governor Boediono and his seven colleagues cut the key rate to 8.25% from 8.75%, according to a statement on Bank Indonesia’s website yesterday.

An Indonesian money changer holds rupiah notes to attract customers on a street in Jakarta November 21, 2008. (Reuters)

The decision was predicted by 20 of 23 economists in a Bloomberg News survey.

Policymakers across Asia are taking advantage of slowing inflation and slashing rates to boost growth as demand for the region’s exports plummet amid a global slump.

Indonesia’s economy may expand as the slowest pace since 2001 this year amid what Boediono describes as increasing “downside risk.”

“Inflation is clearly no longer an issue,” said Lim Su Sian, an economist at DBS Group Holdings Ltd in Singapore.

“More significantly, the domestic economy needs all the support it can get, with trade data pointing to rapidly deteriorating external demand.”

Consumer prices in Indonesia rose 9.2% in January from a year earlier, the slowest pace in nine months.

Exports plunged 20% in December from a year earlier, the biggest decline since 2001.

Sluggish overseas demand is crimping Indonesia’s economic expansion. The central bank expects growth to weaken to between four% and five% this year, from an estimated 6.1% in 2008.


Category: Indonesia

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