# Bank of Thailand Lowers Policy Rate to 1.25% Amid Economic Pressures

- Link: https://www.thailand-business-news.com/currencies/272267-bank-of-thailand-lowers-policy-rate-to-1-25-amid-economic-pressures
- Published: 2025-12-17T14:39:32+07:00
- Author: Olivier Languepin

The Bank of Thailand has lowered its benchmark interest rate to **1.25%**, the country’s
lowest level since 2022, in a bid to shore up a slowing economy and counter persistent
currency strength. The Monetary Policy Committee (MPC) voted unanimously on Wednesday
to cut the one‑day repurchase rate by **25 basis points**, marking the **third reduction
in just over a year**.

The move was widely anticipated, with 23 of 24 economists surveyed by Bloomberg 
predicting a cut. Policymakers cited weakening domestic demand, softer export performance
influenced by U.S. trade policies, and temporary disruptions in manufacturing as
key pressures weighing on growth.

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> The Thai baht has appreciated against the U.S. dollar, ranking among the strongest
> in the region, following changes in market expectations regarding the U.S. Federal
> Reserve’s policy interest rate outlook and Thailand-specific factors. 
> [Monetary Policy Committee’s Decision 6/2025](https://www.bot.or.th/en/news-and-media/news/mpc/news-20251217-ZJSmv2EY.html)

The central bank now forecasts GDP expansion of **2.2% in 2025**, slowing to **1.5%
in 2026** before recovering modestly to **2.3% in 2027**. Tourism remains uneven,
particularly among short‑haul markets, while recent flooding in southern Thailand
has added to near‑term economic drag.

The committee cited slowing economic growth and subdued inflation as key factors
influencing their decision. By lowering the rate, the central bank aims to stimulate
borrowing and investment, supporting overall economic activity. Analysts believe
this move signals the bank’s commitment to maintaining a pro-growth stance amid 
global economic uncertainties.

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## Key Points

### 1. Policy Rate Cut

 * The MPC **unanimously cut the policy rate by 0.25 percentage points**, from **
   1.50% to 1.25%**, effective immediately.
 * The decision aims to support economic recovery amid slowing growth and rising
   risks.

### 2. Economic Outlook (2025–2027)

 * Growth projections: **2.2% in 2025**, **1.5% in 2026**, **2.3% in 2027**.
 * The economy is slowing due to:
    - Weaker private consumption
    - U.S. trade policy impacts on exports
    - Temporary manufacturing disruptions
    - Fewer short‑haul tourists
    - Flooding in southern Thailand
 * Recovery expected in 2027 but still **below potential**, with services leading
   growth.

### 3. Inflation Trends

 * Headline inflation revised down to **-0.1% (2025)**, **0.3% (2026)**, **1.0% (
   2027)**.
 * Inflation remains subdued due to:
    - Lower global energy prices
    - Government subsidies
    - Weak demand
 * Deflation risk considered **low**, but the MPC will monitor closely.

Inflation is expected to remain subdued, with headline inflation revised down to**–
0.1% for 2025**, rising gradually to **1.0% by 2027**. Officials attribute the muted
price environment to lower global energy costs, ongoing government subsidies, and
weak consumer demand. While the MPC sees limited risk of deflation, it pledged to
monitor price dynamics closely.

Analysts say the rate cut underscores the central bank’s commitment to supporting
growth amid global uncertainty. By easing borrowing costs, the MPC aims to stimulate
investment and consumption while complementing broader government measures designed
to revive momentum in Southeast Asia’s second‑largest economy.