Indonesian Central Bank Cuts Rate by 25 Basis Points

Indonesian central bank on Wednesday reduced its benchmark interest rate for a seventh straight month by 25 basis points to 7.0 percent to help spur economic growth, the bank said in a statement.

Indonesia's economy has been struggling to achieve 4.5 percent economic target this year by boosting economic activities.

The reduction was carried out following the continuing of improving outlook of the country's inflation rate.

Consumer prices rose 6.04 percent last month from a year earlier after gaining 7.3 percent in April, the statistic agency has said.

The slow of banking sectors in responding to the reduction of lending rate has also triggered the bank to cut the rate.

"The respond of the banks to the decreasing of the rate is still limited, as it is indicated by the growth of credit and the lowering of credit interest which is still far from expectation," the bank said in the statement.

"Therefore the central bank will continuously reduce the obstacles in the efforts to boost the intermediation function of banks," it said.

Indonesia's economy grew by 4.4 percent in the first quarter this year mainly supported by consumption of household and the government.

The bank predicts the country's economy will grow at the range of 3 to 4 percent this year.