1st LD: Indonesia's annual inflation in May eases to weakest in 7 years

Indonesia's consumer prices in May accelerated at the slowest pace since 2009 as food prices decline, giving rooms to the central bank to trim its benchmark interest rate this month.

The national statistic bureau announced on Wednesday that the consumer prices index dropped to 3.33 percent in May from a year earlier, compared with 3.6 percent in April.

That was in line with median forecast of 5 analysts of 3.32 percent in a poll conducted by Xinhua.

"Prices of rice, tomato, and chilly, witnessed deflation. Besides, prices of house, electricity and water were in check," Suryamin told a press conference at the bureau headquarters. Rice is a staple food for most of 250 million Indonesian populations.

On month, inflation in May eased to 0.24 percent compared with 0.45 percent in April, he revealed.

Annual core inflation, excluding volatile food and administered prices, was flat at 3.41 percent in May from that in April, he disclosed.

Economic analyst from PT bank Danamon Indonesia Wisnu Wardana said that the subdued inflation allows the central bank to cut its basic rate this month as the condition of global and domestic economies are favorable.

"We see that the U.S. Fed reserve will not rise its rate in June. Although some U.S. economic data are good, but there are some data which are not too strong, such as consumption," he told Xinhua by phone after the announcement.

On domestic front, the analyst ruled out concerns over rising demand of foods and clothes during Islamic holy month of Ramadhan, starting on June 6, as the government has taken measures to control the prices.

"We see a downtrend of cyclical impact of Ramadhan from year to year," he said.

"There is a room for rate cut by central bank as long as there is no significant weakening of rupiah against the U.S. dollar," Wisnu added.

Indonesia's central bank, which has adopted the reverse repo rate as a new policy for its benchmark interest rate beginning August this year, targets 2016 inflation to stay between 3 to 5 percent.

The lender aggressively cut its basic rate by 75 basis points to 6.75 percent at the first quarter before taking a pause in April and May as it wants to see the affect of its easing policy.

The lender aims to support the government effort to spur GDP growth at 5 to 5.4 percent this year, faster than the 4.79 percent last year. Endit