Indonesia's central bank cuts rate to spur growth

A woman holds Indonesian rupiah notes in Jakarta, on Dec 16, 2014.  Indonesia's central bank unexpectedly cut its key interest rate by 25 basis points on Tuesday to spur growth as inflation slowed in Southeast Asia's biggest economy. -- PHO
A woman holds Indonesian rupiah notes in Jakarta, on Dec 16, 2014.  Indonesia's central bank unexpectedly cut its key interest rate by 25 basis points on Tuesday to spur growth as inflation slowed in Southeast Asia's biggest economy. -- PHOTO: REUTERS

JAKARTA (AFP) - Indonesia's central bank unexpectedly cut its key interest rate by 25 basis points on Tuesday to spur growth as inflation slowed in Southeast Asia's biggest economy.

It was the first time in three years that the bank had moved to trim the rate, to 7.50 per cent from 7.75 per cent.

"The policy is taken because Bank Indonesia is confident that inflation will remain under control," the central bank said in a statement.

It said it expects this year's inflation to be in the lower end of the 3-5 percent target range.

Economists said the rate cut was likely made to spur growth, which slumped to 5.0 per cent in 2014, the lowest in five years.

"The imports volume was surprisingly low in January, and this means there's much lower economic activity at the start of this year, and this is probably the concern," said Bank Central Asia's chief economist, David Sumual.

New President Joko Widodo has set the growth target for this year at 5.7 per cent.