RTTNews - Thursday, the Indonesian central bank decided to retain its key rate as expected in September, after cutting it for nine straight months to an all time low as inflation started to rise in August.

The Bank Indonesia left the benchmark interest rate unchanged at 6.5%. The central bank has slashed the rate by 300 basis points since December 2008. According to the board of governors, the level of the BI rate is consistent with its aim to achieve the 2010 inflation target.

The Bank Indonesia said it will continue to monitor global and domestic economic developments and will take necessary measures to maintain macroeconomic stability.

The central bank sees inflation in the range of 4%-6% in 2010. Looking forward, next year's inflation is expected to return to the normal pattern of re-strengthening in line with domestic activity and commodity prices, the central bank added.

After easing continuously, annual inflation accelerated to 2.75% in August. Month-on-month, consumer prices were up 0.56%.

The board also said domestic economic activity is gaining momentum. Private spending rose on the availability of finance and rising consumer confidence.

The Indonesian economy expanded 2.3% in the second quarter, quicker than the 1.7% increase in the first three months of the year. However, annual growth eased to 4% from 4.4% in the first quarter. The government forecasts an annual 4.3% growth for the whole year of 2009.

The resilience of the economy in the midst of the global economic crisis is attributed to the election-related spending. The government had announced a fiscal stimulus package of around 1.4% of GDP in February 2009.

Today, the central bank said in its statement that it will provide 3-month repo facility starting September 7.

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