Bank of Thailand keeps benchmark rate at 1.75pct
KUALA LUMPUR: The following is a statement from the Bank of Thailand after its monetary policy committee voted 6 to 1 to hold the key interest rate steady at 1.75 per cent on Wednesday, as expected.
Sakkapop Panyanukul, Secretary of the Monetary Policy Committee, announced the outcome of the meeting on June 25, 2025, as follows:
The Committee voted 6 to 1 to maintain the policy rate at 1.75 per cent. One member voted to cut the policy rate by 0.25 percentage point from 1.75 to 1.50 per cent.
The Thai economy expanded more than anticipated in the first half of 2025 owing to manufacturing production and front-loading exports. Nevertheless, the economy is projected to slow down going forward, due to increasing risks to merchandise exports stemming from US trade policies, as well as geopolitics and domestic factors.
Meanwhile, headline inflation remains subdued due to supply-side factors. Credit growth is slowing down partly because of declining loan demand in some groups and rising credit risks.
The Committee deems that monetary policy should be accommodative to support the economy going forward. Previous policy rate cuts have already provided some cushion against prevailing risks.
However, most committee members voted to maintain the policy rate at this meeting, citing the importance of timing and the effectiveness of monetary policy amid high uncertainties and limited policy space. One committee member voted to cut the policy rate by 0.25 percentage point to alleviate interest rate burdens and support those affected by the weakening economic outlook.
The Thai economy is projected to expand by 2.30 per cent in 2025 and 1.70 per cent in 2026. This year's growth is partly due to a stronger-than-expected outturn in the first quarter and positive leading economic indicators in the second quarter.
Export growth, particularly in electronics and front-loaded goods to the US, has supported manufacturing and related service sectors. However, in the second half of 2025, the economy is expected to slow as merchandise exports face headwinds from US tariffs. Private consumption is also forecast to moderate in line with weakening income and consumer confidence.
The projected number of tourist arrivals has been revised down, although tourism receipts continue to grow due to higher spending per visitor. Certain business sectors are under pressure from intensified import competition and shifting consumer behaviour.
Headline inflation is forecast to remain subdued at 0.50 per cent in 2025 and 0.80 per cent in 2026, due to energy and fresh food prices. Core inflation is projected at 1.00 per cent in 2025 and 0.90 per cent in 2026.
Despite low headline inflation, primarily caused by supply-side factors, there has not been a broad-based decline in prices. Medium-term inflation expectations remain well-anchored within the target range.
Looking ahead, it is necessary to monitor geopolitical risks that could drive up global energy prices.
Overall credit growth remains negative. Financial institutions are cautious in extending credit, especially to SMEs and low-income households. Part of the credit contraction stems from subdued business demand and increased loan repayments.
Credit quality has continued to deteriorate, particularly in SME and housing loans. Interest rates in money markets and financial institutions have declined in line with the recent policy rate cuts.
The baht has appreciated slightly against the US dollar, driven by external factors and in line with regional currencies. The Committee will continue to closely monitor credit growth and credit quality, which could have implications for economic activity.
The prevailing monetary policy framework seeks to maintain price stability, support sustainable growth, and preserve financial stability.
The Committee assesses the economic outlook to remain highly uncertain and stands ready to adjust monetary policy going forward to align with the economic and inflation outlook and associated risks.
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