TEXT-Indonesia c.bank comments on rate rise, inflation

JAKARTA Aug 5 (Reuters) - Indonesia's central bank raised its key overnight rate on Tuesday by 25 basis points for the fourth time this year, as expected, extending its campaign of gradual tightening to contain double-digit inflation.

Here are some excerpts from the statement released by Bank Indonesia after its policy meeting and translated by Reuters.

"Bank Indonesia still sees the risk of inflationary pressure in the future which stem from the fluctuating global oil and food prices, and domestic demand pressure."

"The high risk of inflationary pressures was one of the considerations of Bank Indonesia to hike the BI rate this month, although the impact of the fuel price hike to inflation has been reduced significantly."

"To make the monetary policy more effective, BI rate increase will also continue to be accompanied by optimum use of other monetary instruments such as controlling the exchange rate volatility and absorbing excess liquidity through open market operations. With such integrated policy, we hope inflation in 2009 could ease to our 6.5-7.5 percent target."

"BI expects the 25 basis points increase of BI rate in August 2008 will not hurt the economic activity in Indonesia. Various indicators show that local demand is still strong. The banking industry is still going strong and supported by a good intermediary function."

"Indonesia's economy is predicted to grow at a healthy pace in 2008, supported by exports as well as consumer and government spending. Domestic demand is also likely to be driven by higher spending in the regions and as (activities related to) 2009 general election start to take place."

"Considering several risk factors as well as potential inflationary pressures until the end of the year, BI forecasts inflation by the end of 2008 will be around 11.5-12.5 percent year-on-year."

"Indonesia's balance of payments are still expected to show improvements, so as a stable exchange rate can be maintained. Foreign exchange reserves by the end of July were $60.56 billion or equivalent to 4.7 months of imports and foreign debt repayments." (Reporting by Adriana Nina Kusuma and Tyagita Silka, writing by Muhamad Al Azhari and Evelyn Djuwidja, editing by Sara Webb)