The Bank of Thailand’s Monetary Policy Committee (MPC) has decided to maintain the policy interest rate at 1.5%. This decision was made with a 5:2 vote, indicating a split within the committee. Two members advocated for a rate reduction to 1.25%.
The MPC’s rationale for keeping the rate steady is based on the assessment that accommodative monetary policy is necessary to support ongoing economic recovery. They believe that the effects of previous rate cuts are still being transmitted through the economy. The committee also highlighted concerns about the limited policy space available and emphasized the importance of the timing and effectiveness of monetary policy actions.
Key points
- Policy Rate: Maintained at 1.5% (5 votes in favor, 2 votes for 1.25%).
- Economic Outlook:
- Thai economy is projected to expand in 2025 and 2026, broadly in line with previous forecasts.
- Exports are showing signs of impact from US trade policies.
- Tourism and domestic demand have slowed but are expected to recover gradually.
- Headline inflation is forecast to be lower than previously anticipated, largely due to falling energy and raw food prices.
- Credit Conditions:
- Interest rates in the banking system and financial markets have decreased following earlier policy rate cuts.
- Overall credit growth remains contracted. This is attributed to weakened demand from large corporations amidst economic uncertainty, ongoing debt repayments, and cautious lending practices towards high-risk borrowers, particularly SMEs and low-income households.
Thailand’s economy to expand by 2.2% in 2025 and 1.6% in 2026.
The Thai economy is projected to grow by 2.2% in 2025 and 1.6% in 2026. The first half of 2025 saw growth, boosted by manufacturing and exports to the U.S. However, the latter half of 2025 and 2026 are expected to experience a slowdown due to the effects of U.S. trade policies. Tourism is predicted to recover gradually, and private consumption is expected to grow moderately with government stimulus. Electronic goods exports are anticipated to continue expanding. Key areas to monitor include the impact of U.S. tariffs, government budget disbursement, and SME adjustments to increased competition, credit access challenges, and higher financing costs.
Inflation zero
Inflation is expected to fall to 0.0-0.5% in 2025-2026, returning to target by early 2027, primarily due to supply-side factors such as lower global crude and food prices. Deflationary risks are low as most prices are stable or rising. Core inflation is projected at 0.9% for 2025-2026, with private sector expectations aligned with targets. The Committee will monitor price developments for deflationary risks.
