Bank Indonesia lowered the seven-day reverse repurchase rate by 25 basis points to 6%, marking the first such move since early 2021.

Its two other main rates were also cut by 25 basis points.

“The Federal Funds Rate direction is getting clearer, and the rupiah is relatively stable and even getting stronger.

“These two factors are the reason why we lowered the interest rate right now,” bank governor Perry Warjiyo told reporters.

The central bank had steadily increased borrowing costs to defend the rupiah amid growing global economic uncertainty and rising inflation.

But, with price rises slowing, Perry said the decision to cut was consistent with the bank’s prediction that inflation would remain low in 2024 and 2025.

“With inflation under control and the rupiah rebounding against the US dollar, further cuts are likely,” said Gareth Leather, senior Asia economist at Capital Economics.

A World Bank report said in June that Southeast Asia’s biggest economy is expected to steadily grow over the next two years on the back of domestic consumption and investment despite weak exports.

A new government under Prabowo Subianto will take office next month, and its 2025 budget is expected to outline an implementation plan for the new administration’s economic goals and signal its fiscal policy stance.