Indonesian central bank on Thursday unexpectedly trimmed its benchmark interest rate by 25 basis points to 5.75 percent after keeping it on hold for two months to spur economic growth amid gloomy global economy, the bank said in a statement.
Indonesian economy expanded to 6.5 percent last year, the highest since 1996, but some predictions said it may accelerate at slower pace this year as the debt crisis in Europe could trim exports from emerging Asia. "This decision is taken as a continued step to spur Indonesian economic growth amid weakening global economy,"the statement said.
Indonesia registered a 3.65 percent inflation rate in January compared with 3.79 percent in December, the Statistic Bureau announced on Feb. 1.
The central bank forecast inflation was going to accelerate at nearly 5.5 percent as the government plans to ban private cars from consuming subsidized fuel on April 1. "The central bank would continue to be on alert over the risk of the gloomy global economy and the impact of the government policy on energy, and would continue to strengthen combination of monetary and micro-prudential policies and coordination with the government,"it said.
The central bank cut its basic rate by 75 basis points in October and November to 6 percent to protect the economy before it paused in December and January as Christmas and New Year boost demand of foods.
The bank has taken a step to push bank lowing borrowing cost by widening bottom rate of inter bank lending facility to 200 basis points from 150 basis point below its benchmark interest rate of 6. 00 percent on Jan. 18.
The bank forecasts banking credit is going to grow by 23.6 percent this year, lower than last year's expectation of 24.4 percent, deputy governor of the bank Halim Alamyah has said.
Indonesia has prepared a possible financial stimulus package to boost the economic growth, according to finance ministry.
Indonesian President Susilo Bambang Yudhoyono has pledged to achieve an annual average economic growth target of 6.6 percent by 2014 through building massive infrastructure so as to eliminate poverty.
Indonesia would rely much on growing investment and huge household consumption to make up for lost from weakening exports. The shipping of goods from Indonesia in December decreased by 0.22 percent from that in the previous month, the bureau said.
Indonesia has regained investment grade credit status from two rating agencies, Moody's International Service and Fitch's rating agency in mid-January and mid-December respectively. Nevertheless, the debt crisis in Europe has had investors wary and be cautious to allocate investment in emerging Indonesia, spokesman of the bank Difi A. Djohansyah said on Feb. 8.
The central bank aimed at purchasing long-term government bond to support government bond prices, governor of the bank Darmin Nasution said in January.
In December, the parliament passed a long-awaited land acquisition bill into law, paving the way for the commencement of infrastructure projects./.