Jakarta (ANTARA News) - Bank Indonesia predicts the rate of inflation may be below five percent this year if no new fuel price policy is issued, Darmin Nasution said.

"Our inflation target is five plus and minus one percent and the tendency is going below five percent if no change of fuel policy is made by the government," the governor of the central bank said here on Tuesday.

Darmin said inflation was predicted to remain under control and could be lower than earlier predictions if no change is made in the government fuel price policy and if food supply and distribution is maintained.

Bank Indonesia predicts inflation pressure until the second quarter of 2011 remained under control. Inflation of the Consumer Price Index in the second quarter of 2011 was recorded at 0.36 percent quarter-to-quarter so it declined to 5.54 year-on-year, especially driven by deflation in the foods group while core inflation rose limitedly.

Inflation of administered prices was relatively limited at 0.69 percent quarter-to-quarter because no government policy relating to energy prices was issued.

The food group meanwhile recorded a deflation of -1.35 percent quarter-to-quarter due to correction of the prices of a number of food commodities in April and May.

Bank Indonesia on Tuesday decided to maintain its reference rate at 6.75 percent which is viewed as being in line with efforts to maintain the increasing economic activities and stability in the midst of high domestic liquidity excess and continuing foreign capital inflows.

In the future the central bank would closely watch the potential risk of pressure on macro-economic stability especially from continuing foreign capital inflow and rising global commodity prices.

Bank Indonesia would continue combining its monetary policy with its macro-prudential policy with emphasis put on domestic liquidity control and control of foreign capital and appreciation of the country`s rupiah currency in line with the trend in the appreciation of exchange rates in Asia.

Editor: Priyambodo RH
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