Jakarta (ANTARA News) - Indonesia`s inflation rate is likely to slow to 4.7 percent by the end of this year, or 0.3 percent lower than 5 percent as previously projected, the central bank said.

"Inflation is likely to reach 4.7 percent this year and 4.9 percent next year. The impact of an imminent power tariff increase of 0.25 percent are factored in the figures," the director of Bank Indonesia`s economic research and monetary policy directorate, Perry Warjiyo said here on Saturday.

The lower-than-expected inflation rate was based on the forecast of monthly inflation rates in October and November which could likely be controlled and seasonal factor which would have no significant impact on inflation, he said.

He predicted that the inflation rate in 2012 would be lower than that of this year because of a drop in national economic growth. Yet the government`s plan to raise electricity tariff in 2012 would add to the 2012 inflation.

The expected low inflation rates this year and next year prompted the central bank to cut its key interest rate, locally known as BI rate, by 25 basis points to 6.5 percent from 6.75 percent previously, he said.

"Judging by the trend of inflation rate and economic growth in the future we strongly believe the BI rate will go down further," he said.

The central bank`s bold policy shocked the money market as it came when the money market came under external pressure, he said.

"Yet the policy has shored up market confidence in BI`s commitment to stabilize the market as it did in September," he said.

Editor: Priyambodo RH
Copyright © ANTARA 2011