Abstract
The Monetary Policy Committee (MPC) has unanimously reduced the policy rate by 0.25% to 1.50% to alleviate tight financial conditions and support businesses impacted by U.S. tariffs. They expect the Thai economy to slow in H2/2025 due to front-loaded exports and waning tourism momentum. The MPC emphasizes monitoring the effects of U.S. import tariffs on competition and credit contraction, which may strain vulnerable sectors. Despite low headline inflation driven by supply factors, core inflation remains stable. The MPC maintains an accommodative stance while acknowledging limited policy space.
Summary
MPC Cuts Policy Rate to Support Economic Recovery
The Monetary Policy Committee (MPC) has unanimously decided to reduce the policy rate by 0.25%, bringing it to 1.50%. This decision aligns with the SCB EIC’s forecasts and aims to ease financial pressures on businesses struggling with U.S. tariffs and heightened foreign competition. The MPC will maintain an accommodative monetary stance to support economic stability in the medium term, despite limited policy options.
Economic Outlook and Inflation Trends
The MPC anticipates a slowdown in Thailand’s economy for the latter half of 2025, with GDP growth projected at 2.3% and 1.7% for 2025 and 2026, respectively. Key growth drivers like merchandise exports are expected to weaken, particularly as the tourism sector loses momentum. Inflation remains low, primarily due to increased raw food supply and stable energy prices, but core inflation hovers around 1%.
Credit Conditions and Future Monitoring
Concerns about credit contraction affecting vulnerable sectors persist, as lending slows across SMEs and households due to increased caution from financial institutions. The Thai Baht has appreciated against regional currencies amid weak U.S. dollar trends. The MPC emphasizes the need for ongoing monitoring of economic indicators, while recognizing the limitations of current monetary policy effectiveness in a low-interest rate environment.
Source : MPC Cuts Policy Rate as Expected; SCB EIC Expects Another Cut to 1.25% in Q4
