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Bank Indonesia decided on Thursday to maintain its benchmark interest rate at 6.5 percent on expectations of mild inflation through the first half of this year.

The central bank also said lenders continue to lower their lending rates to help push credit growth.

Annual inflation edged up slightly in February, to 3.81 percent from 3.72 percent in January, mainly because of the effects of stubbornly high rice prices, the Central Statistics Agency (BPS) reported on Monday.

“The decision was made after considering that the BI rate is still consistent with the inflation target in 2010 and 2011 at 4 percent to 6 percent and it is still conducive to strengthening the economic recovery, financial stability and banking intermediation,” the central bank said in a statement on Thursday.

According to Bank Indonesia data, the short-term interbank interest rate had fallen by 0.06 percentage point to 6.17 percent in February, indicating that liquidity is no longer a problem among lenders.

The liquidity also led to lower time-deposit rates, which dropped to an average of 6.87 percent in December from 7.16 percent in the previous month.

The average lending rate for working capital and consumer loans continued to slide, to 13.69 percent and 16.42 percent, respectively, in December. They had averaged 13.96 percent and 16.47 percent, respectively, in November.

“However, lenders’ cost of funds currently remains relatively high compared to before the 2008 crisis, although the BI rate was higher back then,” Bank Indonesia said. “The condition is due to the adjustment lag in the time-deposit interest rate, which makes it remain high above the key rate since the crisis started in October 2008.

“Decreasing risk perception on the back of the economic recovery is expected to push the interest rate for working capital to a much lower level.”

Bank Indonesia acknowledged that credit growth remains slow. In January, the central bank said credit growth had contracted from previous months.

Kostaman Thayib, director of PT Bank Mega, said the slow growth in lending was caused by a slow recovery in demand as the economy remained relatively sluggish.

Agus Martowardojo, president director of PT Bank Mandiri, claimed that the corporate lending rate had actually reached it lowest level ever.

Kostaman said there is room for interest rates to go much lower, but added that some banks might have high loan-to-deposit ratios, meaning they would have to increase their deposit rates to raise additional funding for lending.