The central bank trimmed its key rate again by a quarter percentage point to 9 percent, following healthy inflation numbers for February.

This marks the tenth rate cut since May last year as part of the bank's efforts to spur more growth on higher spending and investment, against a backdrop of lower inflation.

During the period since last May, Bank Indonesia only refrained from lowering its rate in one month -- June -- on that month's inflation uptick, and even cut the rate by monthly half-percentage points between August and December.

There was concern that the central bank would pause in its rate-cut policy this month after widespread flooding that affected Jakarta and wide swathes of farmland last month had given rise to fears of surging inflation.

Consumer prices in February, however, rose by only 0.6 percent from a month earlier, or 6.3 percent from a year ago, virtually unchanged from the January level.

BI Governor Burhanuddin Abdullah said in a statement after the central bank's Board of Governors monthly policy meeting Tuesday that the latest rate cut had been predicated on the favorable inflationary trend -- which was in line with BI's estimate of between 5 and 7 percent for this year -- as well as the need to accelerate growth.

In this year's national budget, the government has targeted a growth rate of 6.3 percent, with the inflation assumption being 6.5 percent and the BI rate assumption 8.5 percent. Indonesia's economy grew by 5.5 percent last year.

Burhanuddin said he hoped Tuesday's rate cut would encourage the banking sector to increase consumer and investment lending on lower loan rates, although he warned that BI's monetary and banking policies would not serve as a panacea for all the economic problems affecting the country. Instead, he urged that further efforts be made to improve Indonesia's investment climate.

Loan growth has been slower than expected, reaching only 14 percent last year due to high lending rates that rose to more than 16 percent at one stage.

In February, BI noted a Rp 15.5 trillion (US$1.7 billion) drop in the value of bank loans from Rp 792.3 trillion at the end of last year, even though a number of major banks had cut their lending rates to between 13 and 14 percent.

Standard Chartered Bank economist Fauzi Ichsan said that the latest cut in the central bank's benchmark rate would not immediately result in a increase in lending.

Although lending rates are now much lower than in the second semester of last year, the demand for loans from business players has remained low.

Corporate borrowers have not been actively seeking new loans as the business situation has not yet improved sufficiently for them to expand their businesses, Fauzi said as quoted by Antara .