Indonesia's central bank kept interest rates unchanged on Wednesday, a move contrary to market expectations that had anticipated another hike after two consecutive increases aimed at supporting the rupiah.

Bank Indonesia kept its 7-day reverse repo rate at 5.75 percent, while 20 out of 33 economists polled by Reuters had expected a 25-basis-point hike, with the rest forecasting no change.

The bank also maintained its overnight deposit facility rate at 4.75 percent and its lending facility rate at 6.50 percent.

Bank Indonesia had raised interest rates by a total of 100 basis points since last May in an attempt to attract foreign investment inflows and support the rupiah, which had come under pressure due to concerns over the country's fiscal position, the central bank's independence, and controversial policies related to commodity exports.

Bank Indonesia Governor Perry Warjiyo said during an online press conference that the decision aligns with the bank's efforts to maintain currency stability and keep inflation within the target range, while relying on other tools to support economic growth.

Ahead of the press conference, the rupiah stood at 17,898 per dollar. Since hitting an all-time low of 18,190 per dollar on June 8, the currency has seen only a modest improvement, continuing to trade near the 18,000 level.

Alongside domestic pressures, the war in Iran and its impact on oil prices have led to capital outflows from Indonesia, which is a net oil importer.

Several central banks in emerging and advanced markets around the world have begun raising interest rates to counter inflationary pressures stemming from Middle East turmoil.

Warjiyo expressed confidence that Indonesia's inflation rate would remain within the central bank's target range of 1.5 percent to 3.5 percent through 2027, despite the rupiah's weakness.

Inflation rose in June to its highest in three months at 3.34 percent, driven by higher prices for unsubsidized fuel. Analysts warned that prices could face further pressure in the coming months due to potential disruptions in food production from unusual drought linked to the El Niño climate phenomenon.