BI Lowered Interest Rate Again to 6.75%

(Friday, 03/07/2009) Bank Indonesia (BI) lowered its reference rate by a quarter of a percentage point to 6.75 percent, acting Governor Miranda Goeltom said at a briefing in Jakarta today.

Indonesia’s central bank said room for reducing borrowing costs further is “limited” after cutting its benchmark interest rate for an eighth straight month. The central bank may be near the end of its cycle of rate cuts as inflation is set to accelerate in the coming months, economists including Destry Damayanti say. Asian policy makers, who have slashed borrowing costs and pledged more than $950 billion of stimulus plans, have started saying their economies could be past the worst of the global slump.

“We don’t expect many rate cuts ahead as inflation tends to increase in the second half,” said Damayanti, chief economist at PT Mandiri Sekuritas in Jakarta. “The current inflation level is nearing its bottom and is likely to increase by the end of the year due to religious festivities.” Southeast Asia’s largest economy may stop cutting interest rates as a credit crunch in the nation’s banking system has been resolved, the Paris-based Organization for Economic Cooperation and Development said June 24.