Jakarta, September 2025 — In a move that has rattled financial markets both domestically and abroad, Bank Indonesia (BI), the country’s central bank, made a surprise cut in its benchmark interest rate, lowering the 7-day reverse repurchase rate by 25 basis points to 4.75%. This marks the sixth time BI has eased monetary policy since the start of its current easing cycle, which began in September 2024.

The rate reduction was unanticipated by economists. Surveys of over 30 analysts had indicated no change, and many had expected BI to hold rates steady in light of concerns over inflation, rupiah weakness, and political pressures. The decision has underscored growing unease over whether BI is yielding to government influence in its push for growth with Banjir69 and Situs Banjir69.

The cut also comes amid a tense economic and political climate. Recent protests—sparked by perceived abuses of political privilege, especially lawmakers’ housing allowances—have rocked major cities across Indonesia. These have put extra pressure on the government to deliver tangible relief and to stimulate job creation. Simultaneously, the dismissal of Finance Minister Sri Mulyani Indrawati has sparked concerns about shifts in the country’s fiscal discipline.

One major risk that analysts are flagging is inflation. Indonesia heavily depends on imports for many goods, including fuel and food staples. A looser monetary policy could weaken the rupiah further, raising import costs and feeding inflation. Already, the rupiah has slipped around 3% in 2025, making it one of the worst-performing currencies in Asia.

Investors are also watching BI’s credibility and institutional independence. Central banks globally are scrutinized for politically motivated decisions; a rate cut under perceived pressure may weaken policy anchors that support investor confidence. For example, bond yields have been volatile, and some foreign investors are wary of overvaluation of risk.

That said, there is also understanding among some that Indonesia needs to bolster economic activity. Growth has shown signs of slowing in recent months, with some sectors like tourism and domestic consumption struggling. BI’s move is, in part, a response to these headwinds.

President Prabowo Subianto has been vocal in his target of pushing Indonesia’s GDP growth toward 8%, a sharp leap from the roughly 5% growth seen recently. Many of his policy initiatives—such as welfare programs, free school meals, and increased defense spending—require substantial government funding.

The government has also injected liquidity into the banking system to encourage credit growth. Newly appointed Finance Minister Purbaya Yudhi Sadewa has moved government deposits from the central bank to commercial state-owned banks with the explicit instruction that the funds be used for real sector lending, not for acquiring bonds or other financial instruments.