BI lowers its key rate to 7.75 percent

The Jakarta Post,  Jakarta | Wed, 03/04/2009 4:50 PM  

Bank Indonesia (BI) has lowered its key rate by 50 basis points to 7.75 percent as part of its efforts to help banking sector cope with the worsening impacts of global financial crisis. 

BI's head for strategic planning and communication bureau Didy Laksmono R. said Wednesday that the bank had evaluated the domestic and global economy performances before deciding to lower the rate. 

“Inflation pressure was relatively low at 0.21 percent during February thanks to lowering fuel prices and the availability of food supply,” he was quoted by Kompas.com as saying. 

He said that the lower prices of international commodity were another factor causing to the low inflation pressure.

Bank Indonesia said in a statement the economic slump was "taking a steeper turn" and developing countries were being hit by a fall in exports and negative market sentiment. 

Indonesia's exports fell 36 percent in January from a year earlier, the biggest drop since 1986, due to plunging demand for natural resources and manufactured goods, the statistic's agency reported Monday. 

It was the fourth straight month the central bank has cut the rate, lowering it a total of one and three quarter points from 9.5 percent since early December. 

Indonesia had been struggling to bring down inflation topping 10 percent, but that figure slowed to 8.6 percent on year and 0.2 percent month-on-month in February, the bank said. 

The central bank forecast a slowdown in economic growth to 4 percent in 2009, from an estimated 6.1 percent in 2008, "with considerable downside risk if global economic growth worsens even more than expected." 

At the same time, Indonesia's banking system - which collapsed just over a decade ago in the Asian financial crisis - was in "stable condition," the bank said. 

International reserves stand at $50.56 billion, with an additional $3 billion from government bond issues and a $2 billion World Bank loan also available. (ewd)