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Postponed Fed rate hike a chance to cut BI rate: central bank
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A pedestrian passes by the Bank Indonesia building in Jakarta. (*/TRIBUNNEWS)
T
he central bank expects the US Federal Reserve to keep interest rate unchanged. Operating on this assumption, the central bank has accelerated its monetary easing policy by cutting the benchmark interest rate to 6.5 percent.
Bank Indonesia (BI) spokesperson Tirta Segara said the US recovery remained sluggish as reflected in weak investment, jobs and inflation.
"This will drive the Fed to remain cautious on the Fed Fund Rate adjustment," Tirta said in Jakarta on Thursday, adding that slower economic growth would crimp the pace of tightening monetary policy in the US in the future.
BI’s easing policy is urgently needed as the central bank projects economic growth in the second quarter to grow at just 4.9 to 5 percent, slightly lower than a previous forecast of 5.1 percent.
BI's monetary policy executive director Juda Agung explained that the lower economic estimate was due to sluggish consumption and weak investment, particularly in non-building investment.
"The central bank considers the delay in the Fed rate hike as a chance to ease interest rates," he said. (ags)
