Jakarta. Bank Indonesia is expected to hold its benchmark interest rate at 6.25 percent during the Board of Governors' meeting on Aug. 20-21, as economists point to global uncertainties, including geopolitical risks and U.S. Federal Reserve policies, alongside domestic economic stability and inflation trends, as key factors influencing the decision.

"We anticipate that BI will not rush to lower interest rates," said Josua Pardede, Chief Economist at Bank Permata, on Tuesday.

The global financial market has improved due to a "risk-on" sentiment driven by the potential for a Fed rate cut and stable domestic inflation, creating space for BI to consider rate cuts later.

Pardede noted that BI is likely to weigh global uncertainties, including geopolitical risks and slowing global economic growth, which could pressure Indonesia's external sector and widen the current account deficit amid fiscal expansion.

Similarly, Hosianna Evalita Situmorang, an economist at Bank Danamon, expects BI to maintain its interest rate in August, citing the strengthening rupiah and significant foreign investor inflows into government bonds and equities over the past week. She added that BI might consider rate cuts in the fourth quarter of 2024 if US economic data weakens further.

Teuku Riefky from think tank LPEM FEB UI echoed these sentiments, stating that although inflation has decreased, a premature rate cut could increase rupiah volatility and trigger capital outflows.

"BI should align its rate cut with the Fed's monetary easing," he said, suggesting that BI hold the rate at 6.25 percent for now.

As of mid-August, the rupiah has appreciated by 3.8 percent to Rp 15,675 per USD, supported by capital inflows amid Fed rate cut expectations. The country's foreign reserves also rose to $145.4 billion in July, reflecting improved economic stability.