Indonesia's inflation held near a nine-year low in December, providing the central bank room to delay raising interest rates.

The consumer price index rose 2.78 percent from a year earlier last month, the central statistics agency said on Monday. That's less than the 2.92 percent median estimate of 17 economists in a Bloomberg News survey. The November inflation rate was 2.41 percent, the lowest since June 2000.

Bank Indonesia has kept its benchmark interest rate at a record low of 6.5 percent since August following nine rate cuts that have helped Southeast Asia's biggest economy avoid a recession. Low inflation and a decline in borrowing costs may spur consumer spending, which accounts for about two-thirds of Indonesia's $514 billion economy.

"The likelihood of Bank Indonesia delaying raising its interest rate is becoming more apparent," Eric Alexander Sugandi, a Jakarta-based economist at Standard Chartered Plc, said before the release. "This will provide the opportunity for banks to further lower their rates, which should boost the economy," he said.

Commodity prices won't surge as they did in 2008 when the global credit crisis triggered an outflow of funds from stocks into commodities, Sugandi said. Oil futures rose to a record $147.27 a barrel in July 2008 compared with about $80 a barrel today.

Big risk

Still, rising prices of commodities such as oil and food are a "big risk" this year, Finance Minister Sri Mulyani Indrawati said in a commentary written for Bloomberg News on Dec. 28. Oil rose 78 percent last year on signs the global economy is recovering, increasing demand for energy.

Indonesia's economy may grow an average 6.6 percent annually over the next five years as the government aims to reduce poverty and unemployment, President Susilo Bambang Yudhoyono said on Monday. Bank Indonesia expects the economy to have expanded 4.3 percent last year and as much as 5.5 percent in 2010.

Growth in bank lending may exceed 20 percent this year, central bank Senior Deputy Governor Darmin Nasution said in November.

"Bank Indonesia still appears unsatisfied by the slow pace of credit growth," Anton Gunawan, chief economist at PT Bank Danamon Indonesia, said in a Dec. 22 note. "Accordingly, Bank Indonesia's monetary policy statement may not turn hawkish very soon."

The central bank will keep the benchmark interest rate unchanged at its next policy meeting on Jan. 6, according to all 18 economists in a Bloomberg News survey. It may not raise the interest rate until the end of this quarter or early second quarter, Danamon's Gunawan said.