Thai central bank unexpectedly holds rates; trims growth forecast
The forecast for headline inflation this year is cut to zero, from 0.5 per cent previously
[BANGKOK] Thailand’s central bank left its key interest rate steady on Wednesday, surprising markets which had expected another cut as the economy struggles with a strengthening baht, negative inflation and US tariffs.
The Bank of Thailand’s (BOT) monetary policy committee voted five to two to keep the one-day repurchase rate steady at 1.50 per cent. The BOT has cut rates four times in the past year.
“The transmission of previous policy rate cuts to the economy is ongoing,” the central bank said in a statement.
The BOT said it now expects the economy to grow 2.2 per cent this year and 1.6 per cent in 2026, slightly lower than previous forecasts of 2.3 per cent and 1.7 per cent, respectively. Last year’s growth was 2.5 per cent.
“The economy in the second half of 2025 throughout 2026 is expected to slow down due to the impacts of US trade policies,” the central bank said.
Only six of 26 economists in a Reuters poll had predicted rates would be kept steady at Wednesday’s review, the first for new governor Vitai Ratanakorn. Nineteen economists had predicted a 25 basis point cut, and one had forecast a 50 bps cut.
A NEWSLETTER FOR YOU
Friday, 8.30 am
Asean Business
Business insights centering on South-east Asia’s fast-growing economies.
Among those who provided a longer-term outlook on rates in the poll, 13 of 21 economists expected the policy rate to be at 1.25 per cent by the end of 2025. The remaining eight saw it at 1.00 per cent.
The forecast for headline inflation this year was cut to zero, from 0.5 per cent previously. The inflation rate has been negative for the past six months, well below the central bank’s target range of 1 per cent to 3 per cent, but the BOT said deflationary risks were low.
The BOT said inflation was expected to be 0.5 per cent in 2026, before it returns to the target range by early 2027.
South-east Asia’s second-largest economy has lagged peers as it struggles with US tariffs, high household debt, weak consumption, and a strong currency.
On Tuesday, Finance Minister Ekniti Nitithanprapas said the government would spend 44 billion baht (S$1.8 billion) on a consumer subsidy programme and will roll out other stimulus measures to try to lift growth above 2.2 per cent this year.
Prime Minister Anutin Charnvirakul’s new government has a limited window to implement its measures, with the premier planning to dissolve parliament by the end of January with a general election to be held in March or early April. REUTERS
