REPUBLIKA.CO.ID, JAKARTA - Bank Indonesia (BI) needed not raise its benchmark interest rate by another 50 basis points to 7 percent despite growing demand from the market, Singapore DBS Bank economist said.

"I hope 6.5 percent is enough until the end of this year to stabilize the rupiah because of regional and global economic upheavals," Eugene Leow said after a discussion on the Indonesian economy on Friday.

Eugene said BI`s recent decision to increase its benchmark interest rate to 6.5 percent had put the national economy in a relatively safe position. "Demand from the domestic market is quite strong and tends to be stable against foreign pressure (regional and global markets)," he said.

He predicted BI was likely to raise its benchmark interest rate to 7 percent or more not in the near future but in the next few years. "It (the increase) is not needed now," he said. 

He also predicted the inflation rate would increase to 8 percent at the end of this year, fueled by a 33 percent increase in the price of subsidized fuel. "If there is no fuel price hike, the inflation may only reach 5.3 percent," he said.

But demand for basic necessaries was expected to fall drastically in September and therefore, the inflation rate would ease, he said. "If there is deflation it will not last longer because it is related to volatile food which contributes a lot to the consumer price index (CPI)," he said.

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