(Adds economist comment, detail, background)
By Harry Suhartono
JAKARTA, Feb 4 (Reuters) - Indonesia's central bank cut its key interest rate by half a percentage point to 8.25 percent on Wednesday, as expected, to underpin economic growth in the face of the global economic crisis.
Parliamentary and presidential elections are due this year and Indonesia's government is under pressure from voters to support the economy.
Still, Bank Indonesia had been slow in cutting rates compared to other central banks as it struggled to bolster investor trust in the battered rupiah currency while sustaining growth in Southeast Asia's biggest economy.
"It's good for our economic growth. BI is concerned about economic growth," said Juniman, an economist at BII in Jakarta.
"Our exports have dropped and in January they are forecast to drop by 50 percent, illustrating the economic slowdown. So BI's consideration is that this is the time to give a monetary stimulus through deeper cuts in the BI rate."
The central bank has forecast economic growth of 4-5 percent this year, slowing from an estimated 6.2 percent in 2008, amid weakening demand for key commodities such as palm oil and rubber.
The government has proposed an economic stimulus package worth 71.3 trillion rupiah ($6.1 billion) including tax incentives for companies and individuals, cuts in fuel and electricity prices and infrastructure spending to sustain growth.
Bank Indonesia cut its benchmark overnight rate
MORE GRADUAL EASING
Most analysts polled by Reuters had expected Bank Indonesia to match this week last month's half point rate cut and anticipated more easing in step with easing inflation. The poll, conducted before Wednesday's announcement, suggested more measured easing ahead with the benchmark rate coming down to 7.5 percent at the end of the year.
"(The rupiah) is another concern but I guess they were given some room by the fact that central banks around the world have been cutting rates. It should put less pressure on the rupiah," said David Cohen, an economist at Action Economics in Singapore.
The rupiah
Indonesian inflation has fallen from a September peak of more than 12 percent to just above 11 percent in December and has dropped to single digit in January, faster than expected.
Annual inflation eased to 9.2 percent in January from December's 11.1 percent, reflecting the impact of subsidised fuel price cuts since December. For more stories on Indonesia's economy, please double click on [ID:nIDECONOMY]. For more stories on the latest news regarding Indonesia's central bank, please double click on [ID:nIDCENBANK]. For stories on Indonesia's measures to support growth amid the global economic crisis, please double click on [ID:nIDSTIM] (Writing by Jan Dahinten; Editing by Tomasz Janowski)