The Bank of Thailand (BoT) has lowered its benchmark interest rate for the fourth time in 10 months, cutting it by 25 basis points to 1.50% in an effort to bolster a sluggish economy grappling with negative inflation, weak consumer sentiment, and the fallout from U.S. tariffs.
Key takeaways
- Bank of Thailand cuts policy rate to 1.50%, marking the fourth reduction in 10 months to counter weak growth and negative inflation.
- MPC cites U.S. tariffs, fragile SMEs, and subdued consumer confidence as key economic headwinds.
- Analysts see potential for additional rate cuts in October and December if economic conditions deteriorate.
The Monetary Policy Committee (MPC) voted unanimously on Wednesday for the reduction, with secretary Sakkapop Panyanukul noting that the move aims to maintain accommodative financial conditions and ease pressure on vulnerable sectors, including small and medium-sized enterprises (SMEs) and low-income households.
Since October 2024, the central bank has trimmed its policy rate by a total of 100 basis points, with previous cuts in February, April, and August. Inflation has remained below the BoT’s 1–3% target since April, while recent data points to further signs of economic weakness.
“The Thai economy in 2025 and 2026 is projected to expand close to the previous assessment. Nevertheless, U.S. trade policies will exacerbate structural problems and weaken competitiveness,” the MPC said in its statement. GDP growth is forecast at 2.3% for 2025, with updated projections due at the October meeting.
The rate cut came sooner than many analysts expected. Kasikorn Research Center had anticipated two more cuts this year but not at this meeting, citing the MPC’s focus on the compounding strain faced by SMEs from tariffs and structural challenges.
SCB EIC, however, said the move was in line with rising economic risks and persistently subdued inflation.
Despite securing a reduced 19% U.S. tariff on certain exports, Thai producers face margin pressure as American importers push for lower prices, with other countries likely to introduce protectionist measures in response.
Credit growth remains negative, weighed down by high debt repayments, tighter credit conditions for SMEs, and reduced borrowing from large firms.
A slowdown in the second half of 2025 is expected, driven by weaker tourism from regional competition and softer private consumption.
The next MPC meeting is scheduled for October 8, shortly after incoming governor Vitai Ratanakorn assumes office.
Analysts expect another rate cut in October, with a possible third reduction in December if conditions worsen.
