BI still has room to cut key rate in 2008 - Danareksa

"If government does not take any drastic move next year such as removing the fuel and electricity subsidy, we believe inflation will be under control and will tend to move to below 6 percent," Danareksa economist Damhuri Nasution told Thomson Financial.
The government still subsidizes about 60 percent of nationwide fuel consumption. This allows PT Pertamina to sell the subsidized fuel products at fixed prices despite the soaring crude oil price. The last fuel price increase was made in October 2005.
Danareksa said the risk arising from the oil price looks limited as oil prices may hover in a range of 75-80 US dollars per barrel in 2008.
On Thursday, Bank Indonesia, cut its benchmark BI rate by 25 basis points after holding it at 8.25 percent in the preceding four months.