The decision to cut the key rate known as BI Rate was also part of the efforts to improve short-, medium- and, long-term interest structure, Bank Indonesia Governor Darmin Nasution said on Thursday following a meeting of the central bank`s board of governors.
The cut was also intended to ease the impact of worsening global economic prospects on the Indonesian economy, he said.
He said developed nations` production and consumption continued to grow at a slow pace while the global financial market remained volatile although it rebounded earlier.
On the other hand, the domestic financial market had become increasingly stable, coupled with positive market sentiment thanks to the policies taken by Bank Indonesia and the government, he said.
Looking ahead, the central bank`s board of governors would always keep watch for global economic developments which had led to uncertainties because of the US and European sovereign debt crisis, he said.
He said the board of governors would take a mixture of monetary and macro-prudential policies to maintain macroeconomic stability and mitigate a potential decline in Indonesian economic performance by always prioritizing the attainment of inflation target of 4-6 percent for 2011, and 3.5-5.5 percent for 2012.
The board of governors believed that the country`s economic growth would remain strong despite mounting concern about the global economic prospects.
The domestic economy grew 6.5 percent until the third quarter of 2011, driven by high exports and strong domestic consumption.
The achievement suggested that the impact of global economic turmoil on the domestic economy was limited. The economy in the fourth quarter of 2011 was also expected to perform better than in the previous quarter because of strong household consumption, and exports.
Earlier, in October, the central bank also lowered its key rate by 0.75 basis points to 6.5 percent from 6.75 percent to 6.50 percent.
(SYS/S012/H-YH)
Editor: Suryanto
Copyright © ANTARA 2011
