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Bank Indonesia cuts benchmark interest rate to 6.50 per cent

JAKARTA, Indonesia – Indonesia’s central bank cut its benchmark interest rate again by a quarter point to 6.50 per cent Thursday amid slow and uneven recovery of the global economy.

Bank Indonesia spokesman Tirta Segara said the cut, the fourth this year, was decided at a two-day meeting of the Board of Governors.

The key interest rate was lowered in January after staying at 7.5 per cent since February 2015. Cuts of another quarter point followed in February and March.

Segara said the central bank will continue monitoring global economic developments that will have an impact in Indonesia. He noted that the country is expected to feel effects from the U.S. economy, which is not in solid recovery as indicated by weakening of consumption and employment as well as low inflation.

The central bank believes that the easing of monetary and macro-prudential policies will strengthen the government’s attempts to boost sustainable economic growth through acceleration of structural reforms.

Domestic economic growth in the second quarter of 2016 is expected to improve although not as strong as previously expected, the central bank said in a statement.

It sees that various steps are still needed to boost domestic demand to continue to strengthen the momentum of economic growth, and with these developments, the overall economic growth for 2016 is estimated to be in the range of 5 per cent to 5.4 per cent.