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Indonesia's central bank should slash interest rates by 100 bps this yr: VP

Wednesday, March 18, 2015 - 17:15
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Indonesia's central bank should cut benchmark interest rates by up to 100 basis points, to 6.5 per cent, by the end of this year, to help revive South-east Asia's largest economy, the country's vice president told Reuters on Wednesday.

[JAKARTA] Indonesia's central bank should cut benchmark interest rates by up to 100 basis points, to 6.5 per cent, by the end of this year, to help revive South-east Asia's largest economy, the country's vice president told Reuters on Wednesday.

The central bank, which surprised markets last month by cutting its benchmark rate, on Tuesday kept its interest rate unchanged at 7.5 per cent on the eve of a key Federal Reserve meeting.

"This year, 7 per cent would be okay, or 6.5 would be okay too, because you need more investment when the economy is slow," vice president Jusuf Kalla said in an interview.

"If your interest rate is higher, then they are more likely to save."

Mr Kalla said he and President Joko Widodo had regularly met top central bank officials over the past month, urging them to cut interest rates as inflation drops.

Asked if this raised questions about the independence of Bank Indonesia, he replied, "Independent from what? Maybe independent from the minister of finance, but not independent from the state."

REUTERS