Bank Indonesia on Thursday raised its key interest rate 25 basis points to 8.75 per cent in a move designed to control soaring inflation, which hit a 21-month high in June.

Boediono, the central bank’s governor, hinted strongly that further rate rises would be necessary, saying that year-on-year inflation could rise from 11.03 per cent to 12.5 per cent by year end because of “economic uncertainties”.