Abstract

The MPC unanimously reduced the policy rate from 1.50% to 1.25% to ease financial conditions amid economic slowdown and rising risks, aiming to alleviate debt burdens for vulnerable groups. They anticipate significant economic slowdowns due to weakened private consumption and adverse export conditions, compounded by flooding and political uncertainty. Expected headline inflation will average negatively this year. The MPC plans to monitor U.S. tariffs, credit growth, and deflation risks closely while adopting a dovish tone that highlights increased concerns over economic challenges and currency strength.


Summary

Policy Rate Cut Amid Economic Slowdown

The Monetary Policy Committee (MPC) has unanimously decided to reduce the policy rate from 1.50% to 1.25% in response to a noticeable economic slowdown and heightened risks. This decision aims to ease financial burdens on vulnerable groups and enhance financial measures’ effectiveness. The MPC remains prepared to modify monetary policy as economic and inflation conditions evolve, prioritizing long-term financial stability.

Economic Outlook and Inflation Risks

The latest insights suggest a significant economic slowdown driven by reduced private consumption and adverse export conditions due to U.S. tariffs. Additional risks include prolonged flooding in southern regions and political uncertainties affecting budgetary processes. Headline inflation is predicted to be negative this year due to decreasing energy prices and government subsidies, though deflation risks appear limited.

Monitoring Key Economic Factors

The MPC will closely track several factors, including potential U.S. import tariffs, credit growth, and the valuation of the Thai baht. This meeting’s communications reflect an evolving perspective, emphasizing the apparent economic slowdown and possible deflation risks. The committee is also concerned about the Thai baht’s appreciation against regional currencies, signaling possible interventions to alleviate upward pressures. Overall, the MPC’s tone indicates heightened awareness of economic vulnerabilities.

Source : MPC Cuts Rate as Expected; SCB EIC Forecasts Another Cut in H1 Next Year

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