Indonesian central bank expects inflation to stay below 3.5 pct this year

Indonesian central bank, Bank Indonesia, forecasts the country's inflation rate to stay below 3.5 percent at year-end as flows of goods improve across the nation, a deputy governor of the lender said here on Thursday.

That is in part favorable for the lender to resume its easing policy to support economic growth, said Mirza Adityaswara, deputy governor of the bank.

"The commitment of president and the government to control foods prices is fruitful," he said at the bank headquarters.

President Joko Widodo has frequently instructed authorities at provincial level to address obstacles in transport of goods in the archipelago country.

According to the national statistic bureau, the cumulative consumer price index by July is 1.76 percent.

The deputy governor said that the lender predicts the pressure on inflation will ease after August until November.

The central bank had aggressively cut basic rate by 100 basis points to 6.5 percent this year as it helps spur growth.

On Aug. 19, it removes the 12-month reference rate to 7-day reverse repo rate to better affect its monetary policy to banking sector.

However, the central bank has put a priority to focus on the inflow of capitals which has started rising since July after the country relaxed tax amnesty program.

The lender also needs to guard rupiah at the rage of government's target of 13,300 per one U.S. dollar this year.

The bank has revised downward its growth forecast to 4.9 to 5.3 percent this year from its previous estimate of 5.0 to 5.4 percent after the government slashed 133 trillion rupiah (some 10.087 billion U.S. dollars) spending at this year's development budget. Endit