Indonesia's central bank lowered its key interest rate for a sixth consecutive month in May to boost consumer spending and spur economic growth.
The Bank Indonesia slashed its benchmark rate by 25 basis points to 7.25%, taking the rate to the lowest level since July 2005, when the measure was introduced. The latest rate cut has resulted in a cumulative reduction of 225 basis points since December 2008.
In a bid to counter the worst global recession since the Second World War, central banks across the globe have lowered their interest rates. Among the major central banks in Asia, the Bank of Japan brought its key rate to a level close to zero and the Bank of Korea kept it at 2% for the second straight month in April to assess the functioning of previous reductions.
The Indonesian central bank kept its economic outlook unchanged this month, saying that the economy will grow between 3% and 4% in 2009 supported by domestic demand and a reasonably good export performance.
The Asian Development Bank forecasts Indonesia's economic growth to slow to 3.6% in 2009 from 6.1% recorded in 2008. However, the growth is expected to pick up to 5% in 2010, if the global economy recovers in the second half of 2010 as assumed.
Recently, Indonesia's President Susilo Bambang Yudhoyono said he expects the economy to expand 4%-4.5% this year, an optimistic estimate compared with those of the country's central bank and the ADB.
Indonesia's annual inflation eased to 7.31% in April from 7.92% in March, the lowest rate since December 2007 when it was 6.59%. The central bank forecasts 2009 inflation to be at the lower end of 5%-7% target. Exports fell 28.87% year-on-year to US$ 8.54 billion in March.
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