Bank Indonesia raises key interest rate to 8.75 percent in third hike this year

The Indonesian Central Bank increased its key one-month interest rate 25 basis points to 8.75 percent Thursday to try to help control surging inflation ignited by recent government fuel hikes.

"Bank Indonesia will continue to implement flexible, cautious and measured policies to tame inflation," the institution's governor, Boediono, said following the decision to raise the rate a third time in 2008.

The bank chief said on-year inflation will likely range between 11.5 percent and 12.5 percent at the end of the year before easing to between 6.5 percent and 7.5 percent at the end of 2009.

Consumer prices rose 11.03 percent in June from the same period last year _ the fastest rate since September 2006 _ after the government slashed fuel subsidies in May to avoid a budget blowout amid the soaring cost of oil on the global market, the Central Statistic Bureau announced Tuesday.

Prices at the pump increased 30 percent overnight, causing the price of basic goods to skyrocket. The cost of food alone jumped by more than 19 percent from the same period one year ago.