Indonesia: Central Bank slashes interest rates to a record low of 6.00%
November 10, 2011
At its 10 November monetary policy meeting, the Central Bank cut the benchmark interest rate by 50 basis points to 6.00%, which represented a record low. The move constituted the second rate change since October, when the Bank cut the benchmark interest rate by 25 basis points. The decision surprised the market, which had expected interest rates to be left unchanged or at most to be decreased by another 25 basis points. With another cut in interest rates, Bank Indonesia reaffirmed its commitment to shield the domestic economy from the global headwinds associated with the faltering recovery in developed economies, as well as heightened volatility in the financial markets. That said, economic growth in Indonesia remains robust. In the third quarter, the economy expanded 6.5% year-on-year and more recent data show no signs of cooling. In addition, the policymakers' decision was in line with existing price developments in Indonesia, as inflation continued to moderate in October.