Jakarta- Indonesia's central bank reduced its benchmark interest rate by 25 basis points to 7.25 per cent Tuesday to support growth amid the slowing global economy.

The reserve bank's sixth consecutive monthly cut brought the prime lending rate to its lowest level since July 2005.

"Bank Indonesia feels the global economy may still be contracting although at a slowed pace," the central bank said in a statement.

But it also said a slowly improving global economic environment has supported the return of capital to emerging markets including Indonesia and led to a strengthening of the rupiah, as well as to rising composite index prices.

Bank Indonesia forecast the country's economy to grow by 3 to 4 per cent this year, with inflation expected to range from 5 to 7 per cent. The economy expanded 6.1 per cent in 2008. (dpa)