Indonesia holds key interest rate as deficit widens

Indonesia's central bank on Thursday kept its key interest rate on hold for a ninth consecutive month despite slowing growth, with its room for manoeuvre limited after the current account deficit more than doubled. Bank Indonesia held the rate at 7.50 per cent, as expected. Official data this month showed that growth in Southeast Asia's top economy slipped to its slowest pace in the second quarter for almost five years. But policymakers' scope to lower rates and boost growth was limited by news that the current account deficit for the second quarter widened to a near record $9.1 billion, or 4.27 per cent of GDP. The figure, announced Thursday by the central bank, compared to just over two per cent in the first quarter, and a record of 4.47 per cent in the second quarter of 2013. The large deficit was a key concern of investors during emerging market turmoil that hit Indonesia in 2013, and a series of aggressive rate hikes last year were largely aimed at reining it in. GDP growth for the second quarter came in at 5.12 per cent, the slowest pace since the third quarter of 2009, hit by a controversial mineral ore export ban. The central bank said Thursday it expected mineral exports to increase in the second half of 2014 as several companies, including US gold and copper miner Freeport-McMoRan, were striking agreements with the government to resume shipments, according to AFP.