SCB expects panel to cut policy rate to 1%

Move should support inflation

- WICHIT CHANTANUSORNSIRI

Siam Commercial Bank (SCB) expects the Monetary Policy Committee (MPC) to cut the policy rate to 1% by the first half of next year to support inflation and mitigate debt deflation risks.

According to Yunyong Thaicharoen, chief economist and sustainability officer at SCB, financial conditions have tightened significantly due to contractions in household and small business lending, as well as the baht's appreciation.

As a result, SCB assessed within the first half of 2026 the MPC will lower the policy rate to 1%, not to stimulate economic growth but to shore up an economy with a low growth outlook.

The move should reduce financial costs, ease appreciation pressures on the baht, lift headline inflation that is expected to remain below the target range, and reduce the risk of debt deflation.

Debt deflation refers to a situation in which an individual's debt level remains unchanged while income declines due to an economic slowdown, thereby increasing the debt burden.

Last Wednesday, the MPC voted unanimously to reduce the policy rate by 25 basis points to 1.25%, effective immediately, to support economic momentum.