Employees talk in the lobby of Bank Indonesia, the country's central bank, in Jakarta on September 16, 2025. (Photo by Bay Ismoyo / AFP)
Jakarta: Indonesia's central bank announced on Wednesday a surprise interest rate cut as it seeks to boost growth weeks after the country was rocked by protests that initially focused on economic inequality.
Bank Indonesia lowered the benchmark seven-day reverse repurchase rate by 25 basis points to 4.75 percent, while its two other key rates were cut by 50 and 25 basis points, respectively.
"This decision is consistent with joint efforts to boost economic growth by maintaining low inflation expectations for 2025 and 2026 ... and the stability of the rupiah exchange rate in line with its fundamentals," central bank governor Perry Warjiyo said.
The central bank would continue to monitor the country's economic growth prospects to take advantage of room for further rate cuts while maintaining exchange rate stability, he added.
It was the sixth rate cut since September last year by Bank Indonesia, which has trimmed borrowing costs by 150 basis points over the past year, and came as a surprise to analysts, the majority of whom predicted the central bank to stand pat.
The decision came weeks after protests in late August and early September that initially focused on economic inequality and lawmakers' lavish pay, but widened to include anger against the police after footage spread of a tactical vehicle killing a 21-year-old gig driver.
Following the protests, President Prabowo Subianto replaced several ministers including influential finance minister Sri Mulyani Indrawati, with new finance chief Purbaya Yudhi Sadewa moving quickly to inject an unprecedented $12 billion into the economy to spur growth.
Analysts said Bank Indonesia's dovish stance could hint at more rate cuts in the future.
"The tone of the press conference was distinctly dovish ... This reinforces our view that further easing is likely in the coming months," Gareth Leather, senior Asia economist at Capital Economics, said in a statement.
"That said, the government and central bank's clear pivot toward growth-supportive measures risks undermining confidence in policymaking."
