(Xinhua)
Updated: 2008-05-09 21:48

JAKARTA  -- The Indonesian central bank of Indonesia forecast Friday the inflation rate could be more than 10 percent this year if the government raises oil price by up to 30 percent.

"Inflation can reach a double digit if the oil price is raised, " Hartadi Sarnowo, deputy governor of the Bank of Indonesia, told reporters at the Jakarta Convention Center on Friday.

The deputy said that the hike of oil prices could lead inflation rate to increase by 2 to 3 percent.

Indonesia's cumulative inflation by April reached 4.01 percent and the year-on-year increase of inflation in April is 8.96 percent, according to the National Statistic Bureau.

The Indonesian government plans to revise up inflation target this year from 6.5 percent to between 8.5 to 9.5 percent, Finance Minister Sri Mulyani has said.

Sarnowo said that a strategic coordination is needed to cope with inflation pressures in the near future.

To reduce the impact of the inflation resulted from the price rise of imported goods, he said that the bank would use its instrument of interest rate.

The bank increased 25 basis points of the interest rates to 8. 25 percent on Wednesday.

Sarnowo said that the bank would always carry out intervention to stabilize rupiah exchange rates.

To decrease the inflation pressure resulted from the hikes of food prices, the government needed to stabilize the prices of strategic commodities, he said.

The deputy urged the State Logistic Agency (BULOG) to purchase all rice produced by farmers without preconditions to stabilize prices.

Indonesia has been in great harvest on paddy since March.

Sarnowo made examples that the stabilized prices of two strategic foods, rice and cooking oil, decreased the consumer prices index in 2007 from 6.6 percent to 5.6 percent, and in 2006 from 6.6 percent to 4.9 percent.

The government plans to increase oil price by up to 30 percent to avoid hefty subsidizes following the soaring global oil prices which has reached 120 US dollars per barrel. The country has increased subsidies on oil sector from 45.8 trillion rupiah (some 5.33 billion US dollars) to 126.8 trillion rupiah (about 13.85 billion US dollars).