Indonesia lowers interest rates

In their bid to reduce the risk on the global recession, the central bank of Indonesia has lowered interest rates for the first time in 2008 and joins other Asian central banks with the aim of cutting borrowing costs in a bid to sustain economic growth.

The government cut its economic growth forecast for next year to just 4.5 percent, which is a seven year low, that is why the bank’s Governor Boediono and his colleagues reduced the interest rate to 9.25 percent from 9.5 percent, which was a highly unprecedented move.

By making the biggest ever reduction on the key policy rate, Indonesia is taking drastic action in order to protect its economy against recession, as most of the export-dependent countries are falling by the wayside.

The cut in interest rates was taken once the financial and economic prospects of both the domestic and global market were analysed, revealing that the impact on the global and domestic economy was heavy.

In the last three months alone, the rupiah has declined 23.5 percent and is the second worst performing currency in Asia, outside Japan.

The International Monetary Fund predicts the Indonesian economy will grow by 4.5 percent next year, compared to a euro zone contraction of 0.5 percent.

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