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July 23, 2008

Indonesia: Central bank official sees lower inflation
Indonesia expects its double-digit inflation to ease in coming months but another increase in interest rates was still a possibility, Reuters quoted a central bank official as saying Tuesday.

Indonesia's central bank raised its key interest rate on July 3 for the third time this year in a bid to contain inflationary pressures fuelled by soaring fuel and food prices.

When asked if a further rate rise was possible, Made Sukada, director of monetary policy research at Bank Indonesia said:

"It is still an option," adding that inflation might have peaked in June. "We are expecting lower inflation in the coming months," he said.

Indonesia's annual inflation in June hit 11.03 percent, its highest level in nearly two years, following an average 29 percent rise in government subsidised fuel prices in late May.

The central bank last week raised its key interest rate by 25 basis points to 8.75 percent, the highest since June last year.

The authority said at the time that it would maintain a "measured" monetary policy, using a combination of tools to control inflation. Analysts interpreted the comments to mean that any further increases in interest rates would not be

aggressive in the near term.

The Indonesian rupiah has gained about 2 percent against the dollar since late May on revived foreign interest in local assets.

The Asia Development Bank earlier on Tuesday forecast that Indonesia's inflation would be 10.1 percent in 2008, before easing in 2009 to 7.8 percent.

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