Indonesia’s Central Bank Cuts Interest Rates For Third Time In As Many Months

Indonesia cut its interest rates for the third time this year in a bid to boost economic growth, local media reported Thursday. The country’s central bank lowered the reference rate by 25 basis points to 6.75 percent, in line with forecasts by economists polled by Bloomberg.

Taking advantage of softening inflation and a strengthening currency, Bank Indonesia Governor Agus Martowardojo also cut lending facility rate and deposit facility rate by 25 basis points each.

“Bank Indonesia will be more cautious in deciding further rate cuts,” spokesman Tirta Segara said after the latest monthly meeting of the central bank’s policy-setting board Thursday.

The bank reduced its lending facility to 7.25 percent from 7.5 percent previously, while its deposit facility rate has also been lowered to 4.75 percent from 5 percent.

“The room was there because inflation has been really soft and the rupiah has been behaving quite well,” Gundy Cahyadi, an economist at DBS Group Holdings Ltd. in Singapore, told Bloomberg before the rate decision.

The rate cut followed a difficult year for the resources-rich country as falling commodity prices pushed economic growth below 5 percent — its slowest pace of growth since 2009.

The central bank has come under pressure from the government for most of last year to cut interest rates and provide monetary stimulus to the economy, according to local media reports.

In an interview on Feb. 11, President Joko Widodo reportedly said he wanted interest rates to “fall, fall, fall, fall and keep falling” so that the country could better compete with its neighbors.