The Indonesian Central Bank (BI) is expected to cut its benchmark interest rate by 25 basis points (bps) to 5 percent today, August 20, 2025, eventhough several economists have provided differing projections regarding the direction of the benchmark interest rate (BI rate).

"This cut takes into account inflation and its expectations remaining well-anchored, the rupiah's stable strengthening throughout August, and conditions in the money market that indicate a potential interest rate cut," Josua Pardede, Chief Economist at Bank Permata, said on Tuesday, August 19, 2025.

He added that inflation remains below BI's target range of 2 percent to 4 percent, and projections for it to remain under control until the end of 2025. Therefore, BI's stance remains loose in a measured manner.

Helmi Arman, Chief Economist at Citibank Indonesia, believes BI still has room to cut the BI rate until the end of 2025. This is due to factors such as uneven economic growth, slowing bank lending, and relatively high real interest rates.

According to him, economic growth in the second quarter of 2025 was recorded at 5.12 percent annually. However, the distribution of growth across sectors remains uneven. Furthermore, bank credit disbursement in June 2025 reached Rp8,060 trillion(US$494 billion), growing 7.77 percent annually, slowing from 8.43 percent in May 2025.

Meanwhile, fundamental improvements in the foreign exchange market and the prospect of a U.S. Federal Reserve (Fed) interest rate cut are supporting factors.

"Corporate demand for dollars for refinancing foreign exchange debt is starting to decline, while the conversion of foreign exchange from natural resource exports into rupiah is increasing," Helmi said.

Myrdal Gunarto, Staff of Economics, Industry, and Global Markets at Maybank Indonesia, estimates that BI will maintain interest rates in August 2025.

He believes BI still needs to anticipate the impact of the tariff war on global and domestic inflation. Currently, Indonesia's inflation rate has remained at 2.37 percent annually since July 2025, and the rupiah exchange rate has hovered above Rp16,200 per US dollar.

"But today, we see the rupiah failing to break below Rp16,100 per US dollar, instead rising above Rp 16,200 per US dollar," Myrdal said.

Meanwhile, BI will also assess the effectiveness of the interest rate cuts that occurred in May and July 2025 due to the impact on loan and deposit interest rates in both banks and non-banks.