Bank Indonesia Cuts Benchmark Rate to 6%

Bank Indonesia unexpectedly cut its benchmark interest rate by 25 basis points to 6.00%, marking its first rate cut since February 2021. This move, which caught markets off guard, was made ahead of the anticipated easing cycle by the U.S. Federal Reserve. Analysts believe that the central bank may continue to lower borrowing costs, possibly as soon as October, given the strengthening rupiah and a stable inflation outlook. The decision is expected to attract higher foreign inflows into Indonesian bonds, supporting the currency further. BI Governor Perry Warjiyo highlighted that recent rupiah gains and market expectations of a U.S. Fed rate cut provided the necessary conditions for this early easing. Economists now anticipate at least one more rate cut by the end of the year.