May 16 (Bloomberg) -- Burhanuddin Abdullah, head of Indonesia's central bank, said he's comfortable with the current level of the rupiah.

He said the central bank will allow market forces to determine the rupiah level, though it may buy or sell the currency to smooth volatility.

The bank might raise interest rates if the consumer price index rose above 6 percent, he sad. It's willing to wait before raising rates, he added. He spoke at the annual meeting of the Asian Development Bank in Jeju, South Korea.

The rupiah fell 3.6 percent against the dollar last week as the U.S. currency gained on expectations the Federal Reserve will raise interest rates as soon as next month.

Indonesia's inflation rate accelerated to 5.9 percent in April. Inflation will average less than 6 percent this year and will probably fall to about 5 percent next year, Finance Minister Boediono told the Asian Development Bank's board of governors.

Southeast Asia's largest economy will expand about 5 percent this year and as much as 5.5 percent next year, he said.

Editor: Wellisz

To contact the reporter on this story: Amit Prakash in Jeju, South Korea at aprakash1@bloomberg.net

Last Updated: May 15, 2004 21:33 EDT