Indonesia's central bank cut its benchmark BI rate by 25 basis points to 7.25 percent, saying this was in line with its previous statement that there was room to ease and "further easing will take place after rigorous assessment of the domestic and global economy, while maintaining macroeconomic and financial system stability."
Bank Indonesia (BI), which cut its rate by 25 basis points in 2015, also said that uncertainty in global financial markets had diminished after the recent rate hike by the U.S. Federal Reserve but it was keeping a close eye on the risk related to a slowdown in China's economy and the continued decline in global commodity prices.
Indonesia's inflation rate dropped to 3.35 percent in December from 4.89 percent in November, but within the government's 2015 target of 4.0 percent, plus/minus 1 percentage point.
BI forecast that it will maintain inflation at the same target in 2016-2017 and then at the target of 3.5 percent, plus/minus 1 percentage point, in 2018.
The central bank added that the country's economic growth in the fourth quarter of the year had not shown "significant improvement" in spite of fiscal stimulus and a relaxation of macro prudential policy, with export growth restrained due to weak global demand and a continued fall in commodity prices.
In addition to the cut in the BI rate, the central bank also cut the overnight deposit and lending facility rates by 25 basis points to 5.25 percent and 7.75 percent, respectively.
Bank Indonesia issued the following statement: