RI'S ECONOMY TO GROW WELL IF BI RATE KEPT BELOW 10 PCT

Jakarta, July 3 (ANTARA) - The Indonesian economy would still perform well, provided Bank Indonesia (BI) keeps its benchmark interest rate below 10 percent, an executive said.

"We are optimistic the economic growth is still on the good track because the BI Rate is below 10 percent," PT Catur Sentosa Adiprana Director Idrus Widjajakusuma said on Thursday.

The central bank on Thursday decided to raise its benchmark interest rate by 25 basis points to 8.75 percent.

BI took the decision after considering the impact of the current situation on the domestic economic stability and financial system, and the prospects for the national economy this year and next year, BI Governor Boediono said.

"Inflationary pressure in 2008 was particularly the result of fuel oil and food price hikes," he said.

BI also noted that the inflationary pressure also resulted from rising demands due to a rise in the amount of bank loans and money supplies until the second quarter of this year.

Therefore, BI considered it necessary to raise its key rate to prevent the second round effect of fuel oil and food price hikes on the prices of other commodities, Boediono said.

A rise in global crude prices would have no significant impact on the national economic growth if the country could increase the export of various commodities, Idrus said.

The Indonesian economy which currently grew by around 6 percent would continue to pick up following the inflow of short-and long-term investments into the country, he said.

The rupiah's stable exchange rate against the dollar was one of the indicators that the Indonesian economy still performed well, he said.

The rupiah edged closer to Rp9,200 per dollar on Thursday. Analysts predicted the Indonesian currency would strengthen below Rp9,200 per dollar in the ensuing days.