- Decision
- Lower
- Rate change
- 25 bps
- policy rate
- 2%
The Bank of Thailand’s Monetary Policy Committee cut its policy rate by 25 bp to 2.00 percent, effective 26 February 2025, judging that softer-than-expected growth—stemming from structural weaknesses in manufacturing, stronger import competition and heightened trade-policy risks from major economies—together with headline inflation hovering near the lower bound of the target range warranted easier financial conditions. The Committee noted that headline inflation should remain subdued amid falling global oil prices and domestic price competition, with medium-term expectations still anchored, while downside risks include further energy subsidies. Economic growth slowed in 2024 on a sharp inventory rundown and is now projected to underperform previous forecasts despite support from private consumption, tourism and technology and agro-manufacturing exports; SMEs in automotive, petrochemical and construction materials remain under pressure. Financial conditions are described as tight, with overall loan growth and credit quality stabilising but continued contraction in SME lending and weaker retail credit linked to sluggish income recovery and high household debt. The baht has become more volatile against the USD amid global policy uncertainty. The Committee believes the rate reduction will ease financial conditions without jeopardising long-term financial stability and will keep monitoring manufacturing output, vulnerable borrowers, market conditions and the currency as it assesses future policy needs.
Rate evolution
From June 2025 to August 2026, the Bank of Thailand cut the policy rate by 75 basis points from 1.75% to 1.00%, with an initial hold, a cut in August, a pause in October, further easing in December and February, and then holds in April, June and August. Early in the period, the Monetary Policy Committee judged policy should stay accommodative as growth was set to slow after a stronger first half, with U.S. trade policies, geopolitics and weaker tourism and domestic demand weighing on the outlook, while headline inflation stayed subdued because of energy and food prices, credit kept contracting, and small and medium-sized enterprise (SME) and low-income borrowers faced tighter access and worsening credit quality. Even so, repeated references to high uncertainty, ongoing transmission of earlier cuts and limited policy space argued for caution at the hold decisions, while the easing steps were aimed at keeping financial conditions supportive, easing debt burdens and, by February, anchoring medium-term inflation expectations as downside inflation risks increased alongside baht appreciation and below-potential growth.
In April, the Committee described 1.00% as sufficiently accommodative and held it there as the Middle East war lifted business costs and inflation through supply-side channels while slowing growth, stressing that uncertainty was high and that inflation risks had shifted upward but were not expected to be broad-based or persistent under weak demand. At its 24 June meeting, it again held the policy rate at 1.00%, judging the setting appropriate to support recovery as growth was stronger than previously assessed but remained low and uneven, inflation was expected to rise on supply-side cost pass-through before easing, and medium-term inflation expectations remained anchored, while overall credit growth stayed subdued and SME and vulnerable household loan quality still needed monitoring. On 26 August, the Committee unanimously maintained the policy rate at 1.00%, judging that accommodative policy alongside targeted financial measures supported the recovery as the technology and artificial intelligence cycle sustained economic momentum, though growth remained low and uneven, inflation was below earlier estimates, and SME lending continued to contract despite an expansion in overall credit.