The Bank of Thailand’s Monetary Policy Committee voted 5 to 2 today to cut the policy rate by 25 basis points, to 1.75%, with immediate effect, Sakkapop Panyanukul, secretary of the committee, announced after its meeting.
He said that the cut is consistent with the deteriorating economic outlook and to cope with increased downside risks by aligning financial conditions with the changing economic and inflation outlook.
The Thai economy is likely to slow down, due to global trade policies and fewer foreign tourist arrivals. Headline inflation remains subdued and is expected to drop below the target range, due mainly to supply-side factors while financial conditions remain tight, according to the committee’s economic outlook assessment.
The impacts of global trade tensions will become evident in the second half of this year, but still represent a high level of uncertainty.
The committee projects that Thailand’s GDP will grow by 2% if trade negotiations are prolonged and US tariffs remain close to the current rates.
If the tariffs are increased, however, the economy is projected to grow by around 1.3% this year, said Sakkapop.
He said the prevailing monetary policy framework seeks to maintain price stability, support sustainable growth and preserve financial stability.
The central bank on Wednesday cut its growth forecast for 2025 to 2.0%, down from just above 2.5% seen in February and 2.9% predicted in December.
It said there were downside risks to growth and U.S. trade tariffs could weigh in the second half of the year, and if the trade war escalated then growth could be just 1.3% this year.
Growth next year was seen at 1.8% in the central bank's "reference" scenario and 1% in its worst-case scenario.
"The U.S. trade policies and potential retaliations from major economies will cause significant changes in the global economic, financial, and trade landscape," it said in a statement.
"This process is only beginning and subject to high uncertainties, with the global economy likely to grow at a slower pace. The situation is expected to be prolonged."
Thailand is among Southeast Asian nations hardest hit by U.S. President Donald Trump's measures, facing a much larger-than-expected 36% tariff if a reduction can't be negotiated before a global moratorium expires in July.
Southeast Asia's second-largest economy has lagged regional peers for years, growing just 2.5% last year.
Inflation, tourism forecasts lowered
Twenty of 28 economists in a Reuters poll had predicted the key rate would be cut this week. The other eight had expected no policy change.
The central bank said it was ready to adjust interest rates as appropriate, and would closely monitor the baht currency. The baht was little changed after the rate decision.
The BOT lowered its 2025 headline inflation forecast to 0.5%, down from 1.1% seen in December and below its target range of 1% to 3%. It predicted core inflation at 0.9% this year versus 1.0% seen earlier.
The central bank reduced its projections for foreign tourist arrivals to 37.5 million this year, from 39.5 million seen in December.
"We think today's easing will be the last for the foreseeable future as the MPC (monetary policy committee) likely will adopt a wait-and-see approach with regards to the lingering tariff uncertainty," said Miguel Chanco, an economist at Pantheon Macroeconomics.
