Oil Prices Fall, BI Holds Interest Rate

Oil Prices Decline Amid Ukraine Peace Hopes

The international energy market is once again showing volatility. Oil prices slipped slightly on Tuesday, August 19, 2025, as hopes grew for potential peace talks between Russia and Ukraine, a plan reportedly being pushed by US President Donald Trump.

In Asian trading, Brent crude dropped $0.07 to $66.53 per barrel, while West Texas Intermediate (WTI) for September delivery slid $0.06 to $63.36 per barrel. The more active October WTI contract also fell to $62.61 per barrel.

This price movement reflects investor optimism that the long-running conflict might ease after Trump claimed to have spoken with both Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskiy about a possible trilateral summit.

Global Energy Outlook

According to Bart Melek, Head of Commodity Strategy at TD Securities, if sanctions on Russian oil are lifted, prices could plunge further to around $58 per barrel by late 2025 or early 2026. However, if the United States tightens secondary sanctions against buyers of Russian oil, such as India, prices could climb again.

These developments highlight the global significance of the war. Any easing of tensions would not only stabilize energy markets but also lower inflationary pressures linked to transportation and production costs worldwide.

Bank Indonesia Holds Interest Rates

Meanwhile, back in Indonesia, the financial market is awaiting a key policy decision. A Reuters poll conducted between August 11–18 suggests that most economists expect Bank Indonesia (BI) to keep its benchmark interest rate at 5.25 percent during its policy meeting on August 20, 2025.

This decision follows a 25-basis-point cut in July, part of a total reduction of 100 bps since September 2024. However, weak credit demand and the need for policy transmission have kept the central bank cautious.

Inflation and Economic Growth

Indonesia’s inflation stood at 2.37 percent in July 2025, close to the mid-point of BI’s 1.5–3.5 percent target range. Meanwhile, second-quarter GDP growth reached 5.12 percent, beating expectations and supporting the central bank’s decision to remain on hold.

Economists project that further monetary easing will likely occur in Q4 2025, especially if the US Federal Reserve begins cutting rates later this year, providing BI more room to maneuver.

Global and Domestic Implications

The combination of falling oil prices and stable monetary policy in Indonesia presents both opportunities and challenges.

• Globally, lower oil prices could ease inflation but remain highly dependent on the uncertain outcome of Ukraine peace talks.
• Domestically, a stable interest rate provides certainty for businesses and consumers while keeping Indonesia’s bond market attractive.

Conclusion

Today, global markets are shaped by two major developments: oil prices dipping on renewed peace hopes in Ukraine, and Bank Indonesia’s decision to hold rates steady at 5.25 percent. Together, these stories underline how geopolitics and domestic monetary policy remain deeply intertwined, influencing energy costs, inflation, and investment flows worldwide.

With uncertainty still high, the balance between international diplomacy and national economic policy will define market directions in the months ahead.