Thailand's central bank cuts rates to lowest in two years to support growth
The monetary committee unanimously voted to cut the one-day repurchase rate by 25 basis points to 1.5 per cent, the lowest in more than two years.
The economy was expected to expand this year and next, close to earlier assessments, but US trade policies would exacerbate structural problems and weaken competitiveness, with small businesses vulnerable, Bank of Thailand (BOT) said in a statement.
'Going forward, the economy is expected to slow down in the second half of the year due to US trade policies, both directly and indirectly, and a decline in short-haul tourist arrivals as a result of intensified regional competition,' it said, adding that private consumption and small businesses would be hit.
'The committee views that monetary policy should be accommodative going forward to support the economy,' it added.
The central bank said it expects growth in South-east Asia's second-largest economy to slow in the second half of the year.
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The baht reversed course to fall 0.1 per cent after the announcement, while Thai stocks were largely unchanged after rising 1.10 per cent in morning trading.
The economy has struggled with weak consumption, high household debt, slowing tourism, trade uncertainty and US tariffs.
The central bank has said the economy might have grown about 3 per cent annually in the second quarter of 2025 but would feel the impact of US tariffs and weakening consumption later this year.
Wednesday's meeting was the last for governor Sethaput Suthiwartnarueput. New governor Vitai Ratanakorn will take over on Oct 1, and he has said rate cuts will support growth.
The next policy review will be on Oct 8.
In June, the BOT predicted 2025 economic growth of 2.3 per cent, with export growth of 4 per cent, after factoring in US tariff rates of 18 per cent. The economy expanded 2.5 per cent last year, lagging peers.
Last month, the US reduced its tariff rate to 19 per cent on imported goods from Thailand, down from the initial 36 per cent level and more aligned with other countries in the region. There are still uncertainties relating to US tariffs on transshipments via Thailand from third countries.
There are still uncertainties relating to US tariffs on transshipments via Thailand from third countries.
The US was Thailand's biggest export market last year, accounting for 18.3 per cent of total shipments, with a value of US$55 billion.
Consumer prices in July fell 0.7 per cent from a year earlier, down for a fourth consecutive month, and below the central bank's target range of 1 to 3 per cent for the fifth consecutive month.
Headline inflation was subdued because of supply side factors including low food prices from favourable weather conditions and downward trends in energy prices, the BOT said.
Price decline was not widespread as core inflation remained stable and near previous assessments, it said.
In June, the central bank predicted headline inflation of 0.5 per cent this year, with the core rate seen at 1 per cent. Adding to the challenges is renewed political turmoil that could bring down Prime Minister Paetongtarn Shinawatra or the coalition government led by her Pheu Thai party. REUTERS
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