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Mon, Nov 19, 2007 - Page 11 News List

Indonesia unlikely to cut rates again, cites inflation risk

BLOOMBERG

Indonesia doesn't expect interest rates will be cut "for the time being" as it monitors inflation, Trade Minister Mari Pangestu said in Singapore yesterday.

"We're keeping a close eye on inflation and we'll see the inflation trends before there will be any [rate cuts]," Pangestu told reporters when asked if rates will be lowered next month.

Indonesia's central bank has held its benchmark rate at 8.25 percent since July, after 13 cuts since the start of last year, amid a surge in oil prices.

Higher fuel prices may push inflation above the central bank's target and dampen growth in the nation which is Southeast Asia's largest economy.

Indonesia's central bank Senior Deputy Governor Miranda Goeltom last week also ruled out more rate cuts in the "very near future" as rising oil costs threaten inflation.

Crude oil has risen more than 50 percent this year.

The government is also maintaining its forecast for economic growth this year, Pangestu said on the sidelines of a summit of ASEAN leaders.

Indonesia forecasts economic growth at 6.3 percent this year and 6.8 percent for next year.

"We are going to work hard to first of all ensure that we increase government spending in terms of the infrastructure priorities that we had already set out in our budget," Pangestu said. "We'll take steps to offset some of the downside risks that we are perceiving in the world market" by diversifying Indonesia's export markets.

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