BoT slashes rate in surprise move to support economy

BANKING headline

- SOMRUEDI BANCHONGDUANG NAREERAT WIRIYAPONG

Mr Don says the cycle of policy rate cuts has likely ended.

The Bank of Thailand believes the cycle of policy rate cuts has ended, with yesterday's reduction deemed sufficient to support the Thai economy.

The Monetary Policy Committee (MPC) voted 4-2 yesterday to cut the policy rate by 25 basis points (bps) to 1%, effective immediately.

Two members voted to keep the policy rate unchanged at 1.25%, according to the MPC secretary Don Nakornthab.

He said if the Thai economy progresses in line with the committee's assessment, the downward interest rate cycle can be considered over.

However, the MPC preserved policy space of 50 bps compared with the low of 0.5% during the pandemic, given heightened uncertainty stemming from US tariff policy, said Mr Don.

"The latest rate cut may have surprised the market in terms of timing, but the market already expected the policy rate to be reduced to 1% this year," he said.

"The reduction represents front-loading to support the Thai economy over the next few months."

Under the baseline scenario, the central bank assumes the US tariff rate imposed on Thai exports will remain at 19% following the US Supreme Court striking down President Donald Trump's tariff regime. The MPC plans to monitor tariff developments.

Although the Thai economy grew faster than expected in the fourth quarter of 2025, growth is projected to remain below its potential of 2.7% in both 2026 and 2027 due to structural constraints and intensifying competition.

The central bank estimates Thai GDP growth of 2% this year.