Last month, the Indonesian central bank also lowered its reference rate by 25 bps.
The decline in the benchmark interest rate was followed by a 25 bps cut of the Deposit Facility rate to 3.5 percent and a 25 bps reduction in Lending Facility to 5 percent effective from Sept 25, 2017.
"The decline in the benchmark rate is consistent with the low realization and forecast for inflation in 2017 and inflation forecasts for 2018 and 2019. It will be below the midpoint of the set target range and the controlled current account deficit within safe limits," the head of the Economic Policy Department and Monetary of BI, Dody Budi Waluyo, noted during a press conference in Jakarta on Friday night.
Dody remarked that external risks, especially those related to the Fed Funds Rate (FFR) policy plan and the normalization of the US central bank balance sheet, have also been taken into account.
"This policy interest rate cut is expected to support improvements in banking intermediation and ongoing domestic economic recovery," Dody revealed.
BI considers that the current benchmark interest rate is sufficient and in line with inflation and macroeconomic forecasts in the future.
BI also stated that it would continue to coordinate with the government to strengthen the policy mix in order to maintain macroeconomic stability and strengthen the momentum of economic recovery.(*)