Bank of Thailand Further Lowers Interest Rate Amid Escalating Trade Conflicts

The Bank of Thailand cut its benchmark interest rate by 25 basis points to 1.75% for the second consecutive time, aiming to stabilize the economy amid global trade uncertainties and impending US tariffs.

Key takeaways

• The Bank of Thailand cut its key interest rate to 1.75% for the second consecutive time, aiming to support the economy amid global trade and tariff uncertainties.
• The central bank downgraded its 2025 growth forecast to 2%, warning it could fall to 1.3% if the US imposes high tariffs on Thai imports.
• Economists predict further rate cuts, with some forecasting a drop to 1% by the end of the year, as Thailand’s economic outlook remains uncertain.
  

The decision, backed by a 5-2 vote of the Monetary Policy Committee, brings the key one-day repurchase rate to its lowest level in two years. The move was widely anticipated, with 20 out of 28 economists polled by Reuters forecasting the cut.

“It’s quite clear that the storm is coming from the trade war,” said BoT Governor Sethaput Suthiwartnarueput in a speech ahead of the meeting, pointing to increasing risks from deteriorating external demand and weakening tourism.

The central bank also downgraded its 2025 growth outlook to 2% from 2.5%, with a warning that growth could slow to as low as 1.3% if the US proceeds with its threatened 36% tariffs on Thai imports. The country had previously forecast GDP growth of 2.9% as recently as December.

Prime Minister Paetongtarn Shinawatra is pursuing talks with the administration of US President Donald Trump to defuse the trade conflict, which has already prompted ratings agency Moody’s to revise Thailand’s credit outlook from stable to negative. 

While Moody’s affirmed the country’s Baa1 investment-grade rating, it flagged risks of further deterioration in both economic and fiscal resilience.

In response, Thai officials criticized the downgrade as premature, arguing that trade negotiations are ongoing and that stimulus measures are in the pipeline for the second half of the year.

Economists believe further easing is likely. Both SCB Economic Intelligence Center and CIMB Thai Bank forecast the BoT will cut rates to 1.25% by year-end, with CIMB suggesting the rate could fall as low as 1% if conditions worsen.

Despite the fragile outlook, Thailand’s currency has proven resilient. The baht has appreciated over 11% against the US dollar over the past year, making it Asia’s best-performing currency, according to Bloomberg.

The BoT maintains that it is not embarking on a broad-based easing cycle, citing limited room to maneuver. However, with Thailand’s export-led economy facing significant external headwinds, pressure is mounting for a more aggressive policy stance.