BI ADVISED TO KEEP BENCHMARK RATE AT PRESENT LEVEL

Jakarta, Sept 2 (ANTARA) - The Indonesian central bank (Bank Indonesia/BI) should maintain its benchmark interest rate at 9 percent while ascertaining whether a present easing in the upward trend in inflation will continue, a development planning official said.

"In essence, there is need to make sure the easing in the upward trend in the inflation rate will last before taking a decision to change the benchmark interest rate," director for macro-planning affairs at the National Development Planning Board (Bappenas), Bambang Prijambodo, said.

He said BI did not yet need to respond to the August inflation of 0.51 percent and the year-on-year inflation of 11.86 percent by raising or lowering its reference interest rate.

Prijambodo said Bank Indonesia should also take into account the stable exchange rate of the rupiah which was now in a range between Rp9,100 and Rp9,200 per US dollar.

BI had projected a benchmark interest rate of 9.5 percent for 2008.

In the meantime, Poltak Hotradero, head of Research Recapital Resources, said if BI maintained its current rate this month, it would have a chance to increase it next month because inflation this month was expected to rise in the wake of the post-fasting month or Idul Fitri holidays.

"Moreover, BI is planning to increase the amount of money in circulation this month," he added.

He said the inflation rate in October would however be slowing down because inflationary pressures after the Idul Fitri holidays would relatively weaken as a result of the slowing down of economic activities.

But the high growth in banking credits which almost reached 35 percent in the middle of August would prompt BI to think hard about taking a decision on its interest rate.

"If BI does not decide to raise its benchmark rate, it will likely raise the reserves ratio requirement," he added.