BANGKOK, Dec 17 (Reuters) – Thailand’s central bank cut its key interest rate on Wednesday, as widely expected, as it looks to support a slowing economy grappling with multiple challenges including political uncertainty, a strengthening baht and U.S.
tariffs.
The Bank of Thailand’s monetary policy committee voted unanimously to cut the one-day repurchase rate by 25 basis points to 1.25% during its final review of the year.
“The Committee assesses that, given apparent economic slowdown as well as heightened risks, monetary policy can be more accommodative,” the central bank said in a statement, though it also acknowledged there was limited policy space.
The BOT said it still expects the economy to grow by 2.2% this year but it has cut its forecast for 2026 to 1.5%, from 1.6% previously.
Growth was 2.5% last year.
Wednesday’s cut, expected by 26 of 27 economists in a Reuters poll, was the fifth since October 2024, with rates down by a total of 125 basis points.
Gareth Leather, senior Asia Economist at Capital Economics, said he expected two more rate cuts by the end of next year.
“The near-term outlook remains subdued, with soft private consumption and weak government spending set to weigh on growth through next year,” Leather said in a report.
Southeast Asia’s second-largest economy grew 1.2% in the third quarter from a year earlier, its slowest pace in four years.
The economy, which has lagged regional peers since the pandemic, has struggled with multiple challenges this year, including U.S.
tariffs, high household debt, a surging baht, a border conflict with Cambodia and political uncertainty ahead of elections in early February.
The baht has risen by 9% against the dollar this year, the second-biggest gain amongst Asian currencies. The government has said the baht’s strength is hurting the economy by affecting the competitiveness of exports and tourism, and the BOT reiterated comments from Tuesday that it was taking action to contain its gains.
“The Committee agrees to escalate the close monitoring of baht movements and consider approaches to manage foreign exchange transactions that exert significant pressures on the baht,” the central bank said.
The headline inflation forecast for this year was cut to -0.1%, from flat previously, and for 2026 it was cut to 0.3% from 0.5%.
The BOT said the subdued inflation reflected lower global energy prices and government subsidies, and that deflationary risks were low.
The central bank’s next interest rate meeting is on February 25, after the national elections. Among economists who provided a longer-term outlook on rates in the poll, 13 of 23 expected the policy rate to fall to 1.00% in the first quarter of 2026.
The remaining 10 saw it at 1.25%.
(Reporting by Orathai Sriring, Kitiphong Thaichareon, Thanadech Staporncharnchai, Chayut Setboonsarng; Editing by John Mair and David Stanway)
