# The Bank of Thailand’s Monetary Policy Committee reduced the policy rate from 2.00% to 1.75%.

- Link: https://www.thailand-business-news.com/banking/215878-the-bank-of-thailands-monetary-policy-committee-reduced-the-policy-rate-from-2-00-to-1-75
- Published: 2025-05-05T05:39:00+07:00
- Author: Yuan Fang

**The Committee decided, with a 5-2 vote, to reduce the policy rate by 0.25 percentage
points, lowering it from 2.00% to 1.75%, effective immediately. Two members voted
to keep the policy rate unchanged.**

**The decision to lower the policy rate was made in response to signs of slowing
economic growth and subdued inflationary pressures. The majority of the Committee
believed that a rate cut would provide additional support to economic activity and
help achieve the central bank’s inflation target. However, the two dissenting members
expressed concerns about the potential risks of loosening monetary policy further,
citing financial stability and long-term economic imbalances as key considerations.**

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 * [U.S. trade policies and potential retaliations from major economies](https://www.thailand-business-news.com/banking/215878-the-bank-of-thailands-monetary-policy-committee-reduced-the-policy-rate-from-2-00-to-1-75#u-s-trade-policies-and-potential-retaliations-from-major-economies)
 * [Thai economy is projected to expand at a slower pace ](https://www.thailand-business-news.com/banking/215878-the-bank-of-thailands-monetary-policy-committee-reduced-the-policy-rate-from-2-00-to-1-75#thai-economy-is-projected-to-expand-at-a-slower-pace)
    - [Global trade policies and lower foreign tourist arrivals](https://www.thailand-business-news.com/banking/215878-the-bank-of-thailands-monetary-policy-committee-reduced-the-policy-rate-from-2-00-to-1-75#global-trade-policies-and-lower-foreign-tourist-arrivals)
 * [Headline Inflation Expected to Fall Below Target Range](https://www.thailand-business-news.com/banking/215878-the-bank-of-thailands-monetary-policy-committee-reduced-the-policy-rate-from-2-00-to-1-75#headline-inflation-expected-to-fall-below-target-range)

## U.S. trade policies and potential retaliations from major economies

The U.S. trade policies and potential retaliations from major economies will cause
significant changes in the global economic, financial, and trade landscape. This
process is only beginning and subject to high uncertainties, with the global economy
likely to grow at a slower pace. The situation is expected to be prolonged, leading
to structural changes and lower efficiency in global trade and production. The unpredictable
nature of future global trade policies of major economies continues to pose significant
challenges in assessing the economic and inflation outlook going forward.

## Thai economy is projected to expand at a slower pace

The Thai economy is projected to expand at a slower pace than anticipated, with 
more downside risks due to uncertainty in major economies’ trade policies and a 
decline in the number of tourists. Headline inflation remains subdued and is expected
to decline below the target range due mainly to supply-side factors. Financial conditions
remain tightened. Most members voted to cut the policy rate by 0.25 percentage points
at this meeting to be consistent with the worsening economic outlook, to cope with
the increased downside risks, and to align financial conditions with the changing
economic and inflation outlook. Two members voted to maintain the policy rate, giving
consideration to the timing when monetary policy is most effective subject to limited
policy space.

### Global trade policies and lower foreign tourist arrivals

**The Thai economy is likely to slow down and faces increasing downside risks owing
to global trade policies and lower foreign tourist arrivals**. Going forward, the
impact of global trade tensions will become more evident in the second half of 2025
but still with high uncertainty. Therefore, the Committee assesses the growth and
inflation outlook under various scenarios. For instance, if trade negotiations are
prolonged and U.S. tariffs remain close to current rates (reference scenario: lower
tariffs), the Thai economy would grow by approximately 2 percent in 2025. Moreover,
if trade tensions intensify and U.S. tariffs are set at higher rates (alternative
scenario: higher tariffs), the Thai economy is projected to grow at around 1.3 percent
in 2025. The resulting outturn depends on policy responses and adjustments from 
major economies. It is therefore crucial to closely monitor global trade developments
and their impacts on the Thai economy. Mitigating the effects of trade shocks will
require a combination of complementary policies to enhance the competitiveness of
the private sector.

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## Headline Inflation Expected to Fall Below Target Range

Headline inflation is projected to decline below the target range largely due to
global crude oil prices and government subsidies which partly alleviate costs of
living and business expenses. Core inflation is expected to remain stable and medium-
term inflation expectations are well-anchored within the target range. However, 
trade protectionism and changes in the global supply chains could affect the Thai
inflation outlook in the future.

Overall financial conditions remain tightened, with loan growth and credit quality
continuing to deteriorate, especially in housing loans and business loans facing
structural issues. In addition, as global trade policies could exert additional 
pressures on the financial positions of businesses and households, the risk of adverse
macro-financial linkages must be monitored.

Meanwhile, volatilities in global financial markets increased due to uncertainties
surrounding trade policies of major economies. Consequently, this led to higher 
volatilities in the Thai financial markets. Nevertheless, the overall functioning
of the Thai financial markets remains normal. The Committee deems it necessary to
closely monitor developments in the global financial markets and movements of the
baht.

The prevailing monetary policy framework seeks to maintain price stability, support
sustainable growth, and preserve financial stability. The Committee assesses that
the economic outlook remains highly uncertain, and will deliberate monetary policy
going forward to align with the economic and inflation outlook and associated risks.

Bank of Thailand (edited 05/04)

**Source** : [Monetary Policy Committee’s Decision 2/2025](https://www.bot.or.th/en/news-and-media/news/news-20250430-2.html)