UPDATE 1-Indonesia c.bank sees June CPI higher than May

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JAKARTA, June 26 (Reuters) - Indonesia's annual inflation in June will be higher than May due to a recent fuel price hike, but it will ease to single digit levels next year as the recent spike is a one-time shock, senior central bankers said on Thursday.

Indonesia raised fuel prices by an average of around 29 percent on May 24 due to ballooning subsidies following high global oil prices. The rise was partly reflected in annual inflation in May which hit 10.38 percent, the highest level since 14.55 percent in September 2006.

"Inflation in June will be higher than in May because the impact of the fuel hike was felt more this month," Bank Indonesia's deputy governor Hartadi Sarwono said. The high inflation rate prompted the central bank, Bank Indonesia, to hike its key rate BIPG by 25 basis points to 8.50 percent on June 5. Bank Indonesia previously raised rates by a quarter of a point in May, the first rise since late 2005.

The next Bank Indonesia policy meeting is on July 3.

Sarwono also said Bank Indonesia will continue to support the rupiah IDR= by selling foreign currencies from its international reserves to help contain inflation.

"A measured exchange rate and interest rate hopefully will be able to reduce the second round impact (of the fuel price hike)," Sarwono said, adding that the central bank "supports a stronger rupiah because it will help contain imported inflation".

"In addition to intervening in the foreign exchange market by selling foreign currency when the demand is high, we will also recycle some of our foreign exchange reserves by selling foreign currency in the market to help our open market operations."

Separately, senior deputy governor Miranda Goeltom said Bank Indonesia is confident the inflation rate in 2009 will ease to single-digit levels as the current inflation rate is merely a one-time shock.