Bank Indonesia cuts key rate to 6.5 percent

Bank Indonesia's board of governors decided Wednesday to cut its benchmark interest rate by 25 basis points to 6.50 percent per annum.

"This decision was made after the board of governors concluded that the declining inflation rate continues in line with the limited domestic demand as well as the expectation of declining inflation," Bank Indonesia said in a statement.

The central bank has consistently cut its benchmark interest rates since late last year. So far this year, it has been cut by a total of 300 basis points.

Bank Indonesia said it would continue to adjust its benchmark rates in line with the central bank's inflation target.

For next year, for example, the central bank aims to target inflation at 5 percent.

In the financial sector, the central bank said that the rate cut had begun to show impacts in the extension of banking credits. Nevertheless, it said that banks remain prudent in extending credits, with non-performing loans staying below 5 percent.

The country's economy is also showing signs of a recovery, with increasing exports and domestic demand. Economic growth is expected to reach between 3.5 percent and 5 percent this year, the central bank said.