Abstract
The MPC voted to maintain the policy rate at 1.75%, considering previous cuts effective in mitigating risks while supporting economic growth. Concerns about an expected slowdown, driven by reduced exports and tourist arrivals, were central to the decision. The Thai economy is projected to grow by 2.3% in 2025, with inflation expected at 0.5%. The MPC highlighted the need for timely policy adjustments due to high uncertainty and looming geopolitical risks, stressing the insufficiency of rate cuts to address specific sector challenges.
Summary
MPC Maintains Policy Rate
The Monetary Policy Committee (MPC) voted 6 to 1 to maintain the policy rate at 1.75%, with one member advocating for a 0.25 percentage point cut. This decision reflects the MPC’s confidence that previous rate cuts have effectively managed downside risks. They believe an accommodative monetary policy is necessary to support the economy, especially as uncertainties rise in the second half of the year.
Economic Growth Forecasts
While the MPC sees limited chances for Thai GDP growth to dip below 2.0% in 2025, it revised growth projections to 2.3% for that year, up from an earlier estimate of 2.0%. This change is based on strong Q1 performance and ongoing development in Q2, despite expected slowdowns from declining exports and reduced tourist arrivals.
Inflation and Credit Growth
Headline inflation is anticipated at 0.5% in 2025 and 0.8% in 2026, primarily due to supply-side factors. The MPC finds the risk of deflation low, as price rises are noted in areas like ready-to-eat meals. Credit growth has slowed amid rising risks, particularly for SMEs. Going forward, policy adjustments will consider credit conditions, geopolitical risks, and domestic factors, emphasizing timely responses for effective monetary management.
