Indonesia's central bank held its key interest rate steady on Tuesday for the third consecutive month despite slowing growth in Southeast Asia's biggest economy. Bank Indonesia's board of governors kept the rate at 7.50 percent, in line with most economists. "The decision is in line with the tight-biased monetary policy stance to maintain the inflation to fall within the 3 to 5 percent target range," central bank governor Agus Martowardojo told reporters.
But a few economists had expected the central bank to cut the rate by 25 basis points to boost slowing growth, which sagged to only 4.7 percent in the first quarter, the slowest in six years. The full year growth for 2014 came in at 5 percent. "The main obstacle to an immediate rate cut is the high rate of inflation, which at 6.4 percent year on year in April, is currently well above the central bank's target," economist Gareth Leather of Capital Economics said.
The bank added that it will soon make it easier to borrow money to make downpayments on property and vehicles, in a bid to fuel growth.
The bank cut the rate by 25 basis points in February to boost growth, which slipped to a five-year low in 2014, and after inflation slowed on the back of falling fuel prices.
However, the cut led to steep falls in the rupiah against the dollar, prompting the bank to pause.