# MPC lowers policy rate to 1%, signaling an extended low-rate approach and potential further cuts if risks emerge

- Link: https://www.thailand-business-news.com/banking/290670-mpc-lowers-policy-rate-to-1-signaling-an-extended-low-rate-approach-and-potential-further-cuts-if-risks-emerge
- Published: 2026-03-05T10:31:40+07:00
- Author: Economic Intelligence Center Siam Commercial Bank

**The MPC cut the policy rate to 1% to ease financial conditions, support SMEs, 
and anchor inflation expectations, citing fragile growth, downside inflation risks,
tighter SME credit, and emphasizing structural reforms beyond monetary policy.**

## MPC Cuts Policy Rate to 1.0% to Ease Financial Conditions

The Monetary Policy Committee (MPC) voted 4-2 to reduce the policy rate from 1.25%
to 1.0% aiming to ease financial burdens on SMEs and households, anchor medium-term
inflation expectations, and support business adaptation amid global uncertainties.
The two dissenting members preferred to maintain the 1.25% rate, considering it 
appropriate given current economic conditions. The MPC views the new 1% rate as 
sufficient, emphasizing the importance of preserving remaining policy space during
high uncertainty and highlighting that structural challenges require policy measures
beyond interest rate adjustments.

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## Economic Outlook and Inflation Risks

The MPC regards the Thai economy as fragile, projecting growth near 2.0% YOY in 
2026-27, below potential growth of 2.7%. Inflation faces downside risks due to lower
energy prices and government subsidies, with headline inflation expected to return
to the target range’s lower bound later than previously anticipated. Trade uncertainty
remains due to fluctuating U.S. tariffs, while the risk of fiscal delays has diminished
with improving government formation prospects.

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## Challenges Facing SMEs and Financial Stability Concerns

SMEs continue to face tight financial conditions with rising loan costs and baht
appreciation impacting exporters’ profits. Despite policy rate cuts, micro-SME loan
rates have increased due to higher credit risks and constrained lending. The MPC
will monitor low-rate environment risks, noting increased risk-taking behavior and
potential credit misallocation but sees no immediate threat. Monetary policy alone
cannot resolve Thailand’s structural growth challenges, requiring complementary 
economic and financial reforms.

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