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Bank Indonesia keeps key rate unchanged after two surprise cuts

[JAKARTA] Indonesia's central bank kept its benchmark interest rate unchanged as expected, pausing after two cuts in a row, as policy makers turn their attention to risks of a weaker currency.

Governor Agus Martowardojo and his board held the seven-day reverse repurchase rate at 4.25 per cent on Thursday, as forecast by all 25 economists surveyed by Bloomberg. The bank has already cut rates eight times since the beginning of last year, including in August and September, to help boost growth in Southeast Asia's biggest economy.

Despite subdued inflation of 3.7 per cent in September - within the target range of 3 per cent to 5 per cent - the central bank is on guard for more currency weakness that could come about as the US Federal Reserves raises interest rates and trims its balance sheet. The rupiah has dropped 1.2 per cent against the dollar since the August rate cut after having been relatively stable for most of this year.

Indonesia's economy has been growing at about 5 per cent, well short of the 7 per cent target set by President Joko Widodo, known as Jokowi, when he came to power three years ago. He said in an interview that he'd "be happy if lending rates fall," although he acknowledged the decision rests with the central bank.


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