FX.co ★ Indonesia Surprises Markets with Rate Cut to Boost Growth

Bank Indonesia made an unexpected move at its policy meeting in September 2025 by reducing its benchmark interest rate by 25 basis points to 4.75%. This marks the third monthly rate cut in a row, surprising the market, which anticipated the rate to remain steady at 5.0%. This decision signifies the sixth reduction since September of the previous year, positioning the benchmark rate at its lowest since October 2022. The central bank's action is based on forecasts indicating that inflation from 2025 to 2026 will stay within its target range of 2.5% ± 1%. The decision also supports a stable Rupiah exchange rate and aims to foster economic growth. Recent indicators revealed that the GDP increased by 5.12% year-on-year in the second quarter, achieving its fastest growth in two years. At the same time, annual inflation eased to 2.31% in August, comfortably within the central bank's target. Furthermore, the overnight deposit rates were decreased by 50 basis points to 3.75%, and the lending facility rates saw a reduction of 25 basis points, dropping to 5.50%.