Indonesia cuts benchmark rate for third month to boost growth

JAKARTA (BLOOMBERG) - Indonesia's central bank cut its main interest rate for the third straight month, taking advantage of a benign inflation outlook and a strengthening currency to deliver a monetary boost to the economy.

Governor Agus Martowardojo and his board lowered the reference rate by 25 basis points to 6.75 per cent, Bank Indonesia said Thursday. That's in line with the forecasts of 15 of the 24 economists surveyed by Bloomberg, while the rest predicted no change. The monetary authority also cut its lending facility rate and deposit facility rate by 25 basis points each.

With exports falling and commodity prices under pressure, the government has been urging Bank Indonesia to join its regional and global counterparts and add monetary stimulus to Southeast Asia's largest economy. The central bank resisted for much of 2015, finally pulling the trigger this year after inflation eased into the 3 per cent to 5 per cent target range and the rupiah staged a rebound against the dollar.

"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, said before the rate decision. "It's all about getting economic growth, loan growth and supporting the economy." President Joko Widodo is seeking to revive an economy that grew at the slowest pace last year since the end of the global financial crisis in 2009. In an interview on Feb. 11, he said he wanted interest rates to "fall, fall, fall, fall and keep falling" so that the country could better compete with its neighbors.