Bank Indonesia`s key rate may have hit bottom but still conducive for growth

Bank Indonesia, the country's central bank, announced Thursday that it has cut its benchmark BI rate by 25 basis points to 8.0 percent, saying its inflation target is achievable and the risk stemming from the oil price spike is under control.

Over the past four monthly policy meetings, the central bank has kept its key rate steady amid increasing inflationary pressure.

David Cohen, an economist at Singapore-based Action Economics, said the decision was a close call. The BI was apparently satisfied with the recent inflation level and is hoping that consumer prices will continue in that range, he told Thomson Financial.

"They were probably relieved that oil prices came off from their recent highs, but there is no guarantee that it will not head back toward 100 dollars (a barrel)."