INFLATION IN 2009 ESTIMATED AT 5 PCT: BI

Jakarta, Feb 5 (ANTARA) - Senior Deputy Governor of Bank Indonesia (BI) Miranda S Goeltom said that inflation in 2009 could be at the lower range of the BI projection of 5 - 7 percent.
"BI's latest assessment indicates the inflation can be at the lower range of BI's projection," she told a hearing with the House of Representatives (DPR)'s Commission XI, which deals with financial affairs, here on Thursday.
She said that the inflation could be curbed to a lower level of five percent as a result of reduced imported inflation and declining international commodity prices as well as minimal output gap pressures and controlled inflation.
Goeltom said that inflationary pressures as a result of administered commodity and volatile food prices would be declining as well.
"This will be in line with guaranteed supplies and food distribution in 2009," she added.
She said that the impact of fuel oil cuts in December 2008 and January 2009 was reflected in the deflation recorded in the past two months.
If this is followed by a cut in the transport fares, inflationary pressures and administered prices could be minimized.
The BI senior deputy governor said she was convinced that the inflation target which was set at 6.2 percent in the state budget would be achieved.
"The government's target at 6.2 percent is still within the range of BI's projection," she said.
In the meantime, prediction on the low inflation rate early in 2009 gave a chance to BI to cut further its benchmark rate.
"This conditions are expected to give a chance to BI to lower its rate where banks are also expected to follow suit, including BI's three-month certificates (SBI)," she said.
She said that the success in achieving a three-month SBI interest rate at 7.5 percent as assumed in the state budget would depend on market conditions.
In the past two months, BI has cut its benchmark rate by 100 basis points from 9.25 percent to 8.25 percent.