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 4 Apr 2009

Indonesia cuts rates to stimulate growth

Indonesia's central bank cut its benchmark interest rate by 0.25 percentage points to 7.5 percent Friday to stimulate slowing growth in Southeast Asia's largest economy.

"There's room for further rate cuts as inflation is expected to continue decreasing due to sliding commodity prices," Bank Indonesia (BI) Deputy Governor Hartadi Sarwono was quoted as saying by Dow Jones Newswires.

Annual inflation eased to 7.92 percent in March from 8.6 percent the month before.

The fifth consecutive rate cut by BI comes days after the government revised downward its 2009 growth estimate to below four percent, after hoping for more than six percent growth months ago.

The last time Indonesia's economy grew at less than four percent was in 2001. The move also comes amid recent data showing the global crisis hitting Indonesia's international trade, with imports tumbling 41.6 percent year on year in February and exports falling 32.9 percent.

Many economists predict Indonesia's economy likely shrank on a quarterly basis in the first quarter of 2009, following a 3.6 percent contraction during the October-December period.

Indonesian shares ended 2.6 percent higher Thursday in a rise partly attributed to positive investor sentiment towards the widely anticipated rate cut.




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