(MENAFN) Indonesia's central bank raised interest rates for the first time in a year in expectation of surging inflation after the government increased the price of subsidized fuel by over 30 percent, Arab News reported.
At a special meeting called following the price increase, Bank Indonesia raised its key rate by 25 basis points to 7.75 percent, the first rise since November last year and its highest level for more than five years.
The government estimates the fuel price rise will lead to about USD8 billion of savings in next year's budget, which the president plans to divert to overhauling infrastructure and funding policies.
"Even though there will be a price increase in the short term, Bank Indonesia... is sure that inflation pressure will remain under control and will be temporary," bank governor said in a statement.
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