BI cuts its benchmark rate by 50 basis points

The Jakarta Post  |  Wed, 02/04/2009 5:18 PM  

Bank Indonesia (BI/the central bank) lowered its benchmark rate by 50 basis points from 8.75 percent to 8.25 percent on Wednesday in an effort to boost a better growth of national economy. 

Antara newswires reported that BI director Dyah N.K. Makhijani had said the central bank decided to lower its benchmark rate (locally known as RI Rate) after carrying out an overall evaluation of economic and financial developments at home and abroad. 

Various latest indicators showed that the global economic developments turned out to be gloomier than predictions made several months earlier. 

The impacts of the world gloomy economy are increasingly felt in Indonesia, particularly on sectors which are related to international trade. Sectors which are not related to overseas still trade experience stable developments, however. 

Last month, BI cut its benchmark rate by 50 basis points from 9.25 percent to 8.75 percent. At that moment, BI saw a good inflation development. 

In December 2008, according to the Central Bureau of Statistics (BPS), a 0.04 percent deflation also took place, mainly because of cuts in the prices of subsidized fuel oils. 

BI Governor Boediono said on Monday the deflation had taken place due to the decline in commodity prices in the country. 

" I think the deflation was fueled by the drop in the prices of various commodities, particularly their domestic prices," he said. 

But he was not yet sure on Monday whether the deflation would lead the central bank to lower its benchmark interest rate. 

He was still collecting information from various sides such as the financial and the real sectors, as well as the market players.

Indonesia`s foreign exchange reserves at the end of January 2009 were recorded at US$50.9 billion or equivalent to 5.2 imports and external debts payment. 

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