Indonesian c.bank governor discusses GDP, inflation

YOGYAKARTA, Indonesia, Sept 1 - Following are comments by Indonesia's central bank governor Boediono from an interview with Reuters.

For the interview, please click on [ID:nJAK123790]

INFLATION AND GROWTH

* "The only problem is inflation. If we could contain this, the aggregate demand will quite significantly boost (economic) growth."

* "In my view, we are dealing with only one issue. It seems that the aggregate demand will rise quite significantly in 2008 and 2009. So, the issue is how to control aggregate demand using monetary" tools.

* "2009 is an election year. If we remember the 2004 (elections), demand was very strong then, spending was very significant. Money in circulation rose sharply in 2004."

* "There is no problem on the demand side. If there is an impediment to growth, it is on the supply side, whether electricity, traffic jams. If it is not because of demand side, we do not use monetary policy to give additional boost. The stimulus is already there."

NEGATIVE REAL RATES

* "There are those who say that our interest rates are too low, the real interest rates are negative ... I say okay, under normal conditions it should not be like that, but look at the countries around us, they are all negative."

* We will do whatever it takes, be it in regards to the BI policy rate, in terms of liquidity management ... so as there will be no sharp fluctuations" in liquidity.

EXCHANGE RATE

* "We are not targeting certain (rupiah levels), what we want is that the foreign exchange rate does not fluctuate sharply."

* "We don't set any target for the rupiah. It cannot be done. What happens with the baht, what happens with the ringgit, won. We also have to look at those" currencies.

HIGH LOAN GROWTH

"Year-on-year loan growth in July was (an estimated) 35 percent. This is very high."

* "That's why we are giving some signals. It's fine if it is for infrastructure, for working capital."

* "If it is needed, there is another tool, that is (tightening) prudential banking regulations. This is if (loan growth) suddenly becomes excessive."

* "The 35 percent loan growth is not excessive. If we look at the financing needs for infrastructure, it is quite large. If it is extended for this, that's okay because it will improve supply capacity and reduce supply constraints."

* "If it is for working capital, that's also okay because the cost of raw materials is also up. Do not curb that. Otherwise it will limit production capacity. Other than those, we have to be careful."