Inflation, food price worries: Indonesia raises interest rates

Extreme weather has disrupted harvests and food distribution, pushing 2010's annual inflation. -- PHOTO: AFP

JAKARTA - INDONESIA'S central bank raised its benchmark interest rate by 25 basis points to 6.75 per cent on Friday, days after data showed inflation was higher than forecast, an official said.

Bank Indonesia deputy governor Halim Alamsyah said the central bank decided to increase its benchmark rate from 6.50 per cent on concerns that rising food prices could stoke inflation further.

'Yes, it's raised by 25 basis points,' Alamsyah told reporters as quoted by Dow Jones Newswire.

It is the first increase since August 2009. The consumer price index rose 7.02 per cent year-on-year in January, more than the market expectation of 6.81 per cent.

Extreme weather has disrupted harvests and food distribution, pushing 2010's annual inflation close to seven per cent, above the official target of 4.0-6.0 per cent.

Prices of chillies, a staple in Indonesia, increased five-fold to around 100,000 rupiahs ($14) a kilogram late in 2010. In January, the government suspended import duties on wheat, soy beans, fertiliser and other food-related items for the rest of 2011. -- AFP