The Indonesian central bank on Wednesday cut its benchmark interest rate by a half percentage point to 7.75 percent to boost economic growth and reduce unemployment, the bank said in a statement.

The ease of inflation performance and the fall of overseas sales have triggered governor Beodiono and his seven colleagues to reduce the rate, which is more than the expected 25 basis points.

The central bank has reduced its economic growth forecast for this year to 4 percent from earlier prediction of between 4 to 5 percent

"The central bank today decided to cut rate by 50 basis points. The decision was taken after monitoring and evaluating on the latest condition of the economy and finance in domestic and overseas, especially in relation with the continuation of the global recession," the bank said in the statement.

Indonesia's inflation in February eased to 8.6 percent and export in December plunges by 35.5 percent to US$7.15 billion from a year earlier, the statistic agency has said.

"The central bank decision aims to spur growth, but unfortunately it is not followed by the lowering of credit interest as quick as expected by banks," said an analyst from Standard Chartered.

He predicted that the rate cut by the central bank would continue in coming months and the rate would be around 7 percent at the year end.

The number of Indonesian workers facing layoff this year, including those domestic and migrant workers, is predicted to top one million people.

The government and the parliament has approved 73.3 trillion rupiah (some US$6.1 billion) fiscal stimulus package to finance massive infrastructure projects to reduce the raising unemployment and the real estate sector.

The recession has trimmed demand and slumped prices of Indonesia's export products, including textile coal, palm oil, rubber and fabricated goods.

Indonesia is the world's biggest palm oil producer and the world's second biggest rubber maker.

The country has decided to rely much on its huge domestic market with over 230 million population following the slumping of its exports.

(Xinhua News Agency March 4, 2009)