Abstract
The Monetary Policy Committee (MPC) voted 5-2 to reduce the policy rate by 0.25 percentage points to 1.75%, anticipating economic slowdown due to U.S. trade policies, lower tourist arrivals, and projected inflation declining below target. The MPC presented two scenarios for Thailand’s economic growth: one assumes ongoing U.S. tariffs with projected growth of 2.0% in 2025, while the other assumes reduced tariffs and a U.S. recession, predicting 1.3% growth. The MPC emphasized the need for accommodative monetary policy amid global trade volatility.
Summary
MPC Policy Rate Cut
The Monetary Policy Committee (MPC) has voted to cut the policy rate by 0.25 percentage points, lowering it to 1.75%. This decision reflects concerns about a slowing Thai economy, influenced by ongoing U.S. trade policies and disappointing tourist arrivals. Additionally, projected headline inflation is expected to fall below target levels, with financial conditions remaining tight. The MPC identifies escalating global trade tensions as a potential "storm" impacting the economy in late 2025.
Economic Scenarios
The MPC did not provide a baseline economic projection but offered two scenarios. The reference scenario anticipates that U.S. tariffs will remain unchanged, estimating Thai economic growth at 2.0% in 2025. Conversely, an alternative scenario suggests reduced U.S. tariffs amidst a potential recession, projecting lower growth rates of 1.3%. Regardless of the scenario, significant downside risks to growth are expected.
Accommodative Monetary Policy
In light of these developments, the MPC emphasized the need for an accommodative monetary policy to support businesses and households. Unlike previous stances advocating for neutrality, the MPC is open to adjusting the policy rate in response to evolving global conditions. This shift aims to address the current economic uncertainties rather than invoking an easing cycle akin to past financial crises.
Source : MPC Cuts Policy Rate as Expected; SCB EIC Expects Two More Cuts to 1.25% by Year-End
