Indonesian central bank keeps rate unchanged, cuts primary reserve requirement

Indonesian central bank refrains from slashing its benchmark interest rate, but lowers primary reserve requirement for lenders as it seeks to guard rupiah and prop up the economy.

The central bank governor board meeting on Tuesday decided to hold the basic rate at 7.5 percent for the ninth month amid the prospect of a U.S. Federal Reserve rate hike by the year end, Agus Martowardojo, governor of the bank said.

In an easing policy move, the meeting lowered primary reserve requirement ratio for banks to 7.5 percent from 8 percent effective Dec. 1, Martowardojo said.

"We expect it can boost financing so that it can prop up the economy, which started picking up at the third quarter," he told a press conference at the central bank headquarters.

The board meeting also decided to keep deposit facility and lending facility rates unchanged at 5.5 percent and 8.0 percent respectively, Martowardojo revealed.

Pressure to slash the main rate was voiced recently by the country's Vice President Jusuf Kalla after the economy accelerated at a faster pace of 4.73 percent at the three months ended September, but concerns over possible capital outflows may have prevented the lender from doing so.

GDP growth during the first half of the year eased to 4.7 percent, the slowest pace in six years, according to the national statistic bureau.

Meanwhile, the country's current account deficit remains high, making it vulnerable to capital outflows. Endit