Indonesian president says lower inflation shows room for possible rate cut

President Joko "Jokowi" Widodo

JAKARTA - Indonesia's president said on Monday the fall in consumer prices signalled that there was room for another interest rate cut, but the decision was up to the central bank. "If we look at the situation, inflation has fallen, we're seeing deflation, which is a signal a cut is possible. But that is Bank Indonesia's territory," President Joko Widodo told reporters after meeting with central bank governor Agus Martowardojo.

In a surprise move, Bank Indonesia cut its benchmark rate by 25 bps to 7.50 per cent last month saying inflation would fall below 4 per cent by year-end, compared with its target range of 3-5 per cent. The central bank next meets on March 17.

Mr Joko said he hoped the weakness in the rupiah, which dropped to a 17-year low on Monday, was temporary and told the central bank he would like the rupiah at a "safe level".

Annual inflation in February eased more than expected to 6.29 per cent, from 6.96 per cent in January. A Reuters poll had expected inflation to slow to 6.70 per cent.

On a monthly basis, prices fell for the second month at a rate of 0.36 per cent.