The MPC voted 6-1 to keep the policy rate at 1.75%, citing effective prior cuts, economic slowdown risks, high uncertainty, limited policy space, and modest GDP growth projections for 2025-2026.
Policy Rate Decision and Economic Support
The Monetary Policy Committee (MPC) voted 6 to 1 to keep the policy rate steady at 1.75%, with one member favoring a 0.25% cut. This reflects their view that earlier rate cuts effectively managed downside risks amid high uncertainty and limited policy space. They stressed the importance of timing in rate adjustments and maintaining accommodative policy to support future economic growth, particularly given the anticipated slowdown and rising risks in the latter half of the year.
Economic Growth Projections and Risks
The MPC anticipates Thai GDP growth of 2.3% in 2025, revised upwards due to stronger-than-expected Q1 and Q2 performance. However, growth is projected to slow later due to declining exports and foreign tourist arrivals, alongside competition from imports. For 2026, growth is forecast at 1.7%. The MPC also incorporated the impact of a THB 157 billion stimulus package and current Thailand-Cambodia tensions, though political uncertainties remain unaccounted for.
Inflation and Monetary Policy Outlook
Headline inflation is projected at 0.5% in 2025 and 0.8% in 2026, driven mostly by supply-side factors, with low risk of deflation. Credit growth has slowed due to weaker loan demand and rising risks, especially for SMEs facing import competition. The MPC highlighted that while monetary policy should remain accommodative, its effectiveness is limited under current conditions. Future rate adjustments will depend on credit conditions, geopolitical events, and domestic factors, with possible cuts if financial conditions tighten broadly.
