BI cuts benchmark rate by 50 basis points

Wednesday, 7 January 2009

ANTARA

Bank Indonesia (BI/the central bank) during its board of governors meeting on Wednesday decided to cut its benchmark interest rate, locally known as BI Rate, by 50 basis points to 8.75 percent.

BI Governor Boediono told a press conference following the meeting that the central bank took the decision after it evaluated the current economic and monetary conditions at home and overseas.

"The risk considerations in 2009 require us to take monetary polices which support economic growth while keeping inflation and stability for the financial sector for the middle term," he said.

He said that the BI Rate cut was taken after seeing the downward trend in the inflationary pressures at home due the declining in the world`s commodities, food and energy prices and the slowing down of aggregate demands.

"Deflation by 0.04 percent adversely happened in December 2008 so that the inflation rate of 11.06 percent was also one of the factors for BI to lower its rate," Boediono said.

Boediono predicted that inflation in 2009 would continue to go down to a range of 507 percent so that there were still rooms for BI to lower its rate further.

He was even convinced that the economic conditions in 2009 would be better than in 2008.

"I feel that 2009 would be better," he added.