Bank Indonesia took unexpectedly drastic measures at its latest meeting, raising its key borrowing rate for the first time in two years. On Wednesday, the financial regulator decided to increase the seven-day reverse repo rate by 50 basis points, bringing it to 5.25%. This aggressive move caught most industry experts by surprise, as more than half of the 29 economists surveyed by Reuters had forecast a much more modest increase of just 25 basis points, while the remaining analysts expected no change at all.

In sync with the key rate, the Indonesian central bank also adjusted related economic parameters, raising deposit and lending rates by the same amount to 4.25% and 6.00%, respectively. This decisive monetary policy immediately impacted currency markets, causing a significant appreciation of the national currency. By mid-day, the Indonesian rupiah had shown strong gains, adding more than half a percent against the US dollar to settle at 17,600.00.