Jakarta (ANTARA News) - Bank Indonesia`s decision to cut its key rate by 25 basis points to 6.50 percent will most likely send a positive sentiment to issuers in the banking sector at the Indonesian Stock Exchange, an analyst said.

The decision would no doubt have a good impact on the banking sector in the long run, Edwin Sinaga of PT Finance Corporindo said on Tuesday.

Edwin said a significant drop in the prices of shares in the banking sector some time ago was not caused by domestic economic fundamentals but by profit taking action.

Analyst Viviet S Putri of Anugerah Securindo Indonesia meanwhile said the drop in the key rate would benefit not only the banking sector but also exporters.

"BI`s decision to cut its key rate is a good step although the decision came after advanced countries had earlier reduced their interest rates," she said.

Bank Indonesia decided on Tuesday to cut its key interest rate by 25 basis points to 6.50 percent after it remained unchanged at 6.75 percent for eight months since February 4.

Bank Indonesia Governor Darmin Nasution said the decision to cut the key rate was made after the central bank had signaled to lower it because of controllable inflation rate.

"The 2011 inflation will be lower and stay at below 5 percent in line with the correction of global commodity prices," he said.

With the drop, the key rate has returned to the level of 6.5 percent between August 9, 2009 and February 4, 2011.

Editor: Priyambodo RH
Copyright © ANTARA 2011