BI CUTS KEY RATE TO 6.5 PERCENT

Jakarta, Aug. 5 (ANTARA) - The Board of Bank Indonesia (BI)'s Governors (RDG) in a meeting here on Wednesday decided to cut the BI Rate by 25 basis points to 6.50 percent.

The decision was taken after the RDG concluded that the trend of the inflation decrease still continued in accordance with limited domestic demand and the continued decrease in the inflation expectation, according to a conclusion of the RDG meeting.

The Board of the BI's Governors considered the cut in the BI Rate currently was still consistent with the BI inflation target in the future expected to be around four percent.

However, BI noticed an inflation pressure in 2010 caused by the increases in the domestic demands and and commodity prices in the international market.

In this context, the future monetary policy would be directed to be more anticipative toward the inflation hike potential in order to achieve the target of around five percent inflation rate in 2010, the RDG said.

The RDG also viewed that responds of bank interest rates toward the BI Rate cut was getting better. The bank credit channeling also improved although its growth was still slow.

Meanwhile, from the micro economic point of view, the banking industry was still in stable condition as reflected by the Capital Adequacy Rate (CAR) dan the non-performing loan (NPL) maintained position at below 5 percent.

Bank Indonesia, together with the government and the banking sector, would continue to make coordination to take steps in order to maximize the banking intermediation in the second semester of 2009.