The Indonesia central bank hopes an interest rate cut will help boost growth and the rupiah (BAY ISMOYO)

Jakarta (AFP) – Indonesia cut interest rates for the first time in nearly two years on Thursday as Southeast Asia’s largest economy seeks to boost growth.

Bank Indonesia (BI) trimmed the key lending rate 25 basis points to 5.75 percent, a decision made ahead of an anticipated rate cut by the US Federal Reserve later this month.

“The policy was taken as we estimate inflation will remain low and we need to maintain the momentum for economic growth,” Bank Indonesia governor Perry Warjiyo said.

BI also lowered its deposit and lending facilities rates by 25 basis points to 6.5 percent and 5 percent respectively.

Indonesia’s economy grew 5.07 percent in the first quarter from a year earlier, amid softening prices for key commodities — including palm oil and coal — and an ongoing trade war between the US and China.

Warjiyo said although global uncertainty was improving, the bank was ready for prolonged tensions between Beijing and Washington.

“Bank Indonesia still sees room for accommodative monetary policies,” he said.

Looking ahead, the slowing economy and muted inflation could lead to more cuts, economists said.

“But the uncertain outlook for the currency means that this is unlikely to be the beginning of a prolonged easing cycle,” said Gareth Leather, Asia economist from Capital Economics.

The country has been wrestling with a weak rupiah, dented by a selloff in emerging-market currencies that saw the unit slump to levels last seen during the Asian financial crisis 20 years ago.

However, it has recovered ground in recent months, supported by the central bank hiking interest rates repeatedly through 2018.

Disclaimer: Validity of the above story is for 7 Days from original date of publishing. Source: AFP.