Bank Indonesia raises key rate to 9.25%

By Angela McDaniels

Tacoma, Wash., Sept. 4 - Bank Indonesia said it raised the BI rate by 25 basis points to 9.25%.

The decision was made at a meeting of the board of governors on Thursday with the aim of safeguarding economic and financial system stability in support of the medium-term inflation target, according to a news release from the bank.

"Domestic inflationary pressure remains strong, mainly because of rapid growth in aggregate demand. For now, pressures from escalating energy, foodstuff and world commodity prices have eased, but nevertheless warrant continued vigilance," Bank Indonesia governor Boediono said in the release.

"Bank Indonesia sees the need to manage and contain growth in aggregate demand within safe limits for achievement of the inflation target and overall economic stability in the medium-term."

The bank said it aims to lower the rate of inflation in 2009 to within the 6.5% to 7.5% range.

Inflation in Indonesia was 0.51% in August, compared with 1.37% in the preceding month with the annual rate of inflation recorded at 11.85%, the release stated.

Inflation for January through July of 2008 reached 9.4%, compared with 6.51% for the same period of 2007.

The bank forecasts that year-over-year Consumer Price Index inflation at the end of 2008 will be 11.5% to 12.5%.

Bank Indonesia is located in Jakarta, Indonesia, and is the country's central bank.

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