Bank Indonesia unexpectedly cut its benchmark interest rate by 25 basis points to 5.75%, marking its first rate cut since September 2024. The markets were widely anticipating that the rate would remain unchanged at 6% for a fourth consecutive meeting.

Indonesia's central bank said the rupiah's fall against U.S. dollar was still under control, after the currency slid to its weakest level in more than six months on Thursday following a surprise cut in interest rates the day before.

The Indonesian rupiah stayed near six-month lows on Thursday, while the South Korean won snapped a three-day winning streak after both countries' central banks shocked investors by eschewing widely anticipated interest rate calls.

It also comes just three months after President Prabowo Subianto took office with an ambitious goal of boosting growth to 8 per cent in the next five years. Indonesia has been growing at a steady rate of 5 per cent over the previous decade, except for during the Covid pandemic.

Indonesia's central bank unexpectedly cut policy rates on Wednesday, resuming its monetary easing to prop up growth in Southeast Asia's largest economy despite financial market volatility that has sharply weakened the rupiah currency.

Indonesia unexpectedly reduced its key interest rate in its first monetary policy decision this year, moving to bolster economic growth even after the local currency recently weakened beyond the key level of 16,

Indonesia’s central bank defied the expectations of practically the entire market when it cut interest rates this week, deepening a period of uncertainty for government bond yields. Most Read from BloombergThese Homes Withstood the LA Fires.