Thai central bank holds rates steady, eyes tariffs, political tensions
BANGKOK, June 25 (Reuters) - Thailand's central bank left its key interest rate unchanged on Wednesday, as expected, holding steady after two consecutive cuts as it seeks to preserve limited policy space amid trade uncertainty and renewed domestic political turmoil.
The Bank of Thailand's monetary policy committee voted 6 to 1 to hold the one-day repurchase rate (THCBIR=ECI), opens new tab steady at 1.75%, the lowest in two years. The BOT had cut the rate by 25 basis points at reviews in February and April.
The BOT said economic growth was stronger than expected in the first half of the year, in part because of frontloading of export orders to beat U.S. tariffs, but said the outlook was uncertain and it was ready to adjust rates as needed.
"The Thai economy is projected to slow down going forward, as a result of increasing risks to merchandise exports stemming from U.S. trade policies as well as geopolitics and domestic factors," it said in a statement.
The country faces a 36% U.S. tariff on its exports, a key driver of growth, if it fails to negotiate a reduction before a moratorium expires in July. A tariff of 10% has been set for most nations while the moratorium is in place.
The BOT said assuming Thailand negotiated an 18% tariff and the rate was 10% for other countries, then growth would be 2.3% this year and 1.7% in 2026.
The baht was largely unchanged against the U.S. dollar after the decision to hold rates steady, which had been expected by 21 of 33 economists in a Reuters poll.
Thailand's economy has struggled with weak consumption, soaring household debt, slowing tourism, trade uncertainty and potentially steep U.S. tariffs.
Adding to the challenges is a new round of political turmoil that could bring down Prime Minister Paetongtarn Shinawatra or the coalition government led by her Pheu Thai party.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Reuters
an hour ago
- Reuters
Indian economy resilient despite global flux, central bank bulletin says
MUMBAI, June 25 (Reuters) - India's economy remains resilient despite a state of flux in the global economy due to the twin shocks from trade and geopolitical tensions, the Reserve Bank of India said in its monthly bulletin released on Wednesday. The RBI cut its key policy rate by a larger-than-expected 50 basis points earlier this month and slashed the reserve ratio for banks as low inflation gave it room to focus on supporting growth amid volatile global conditions. "In this state of elevated global uncertainty, various high-frequency indicators for May 2025 point towards resilient economic activity in India across the industrial and services sectors," the RBI said in its 'State of the Economy' article. "Agriculture showed a broad-based increase in production across most major crops during 2024-25. The domestic prices situation remains benign with headline inflation staying below the target for the fourth consecutive month in May," it said. India's annual retail inflation slowed to 2.82% in May, the lowest in more than six years, from 3.16% in April. Financial conditions remain conducive to facilitate an efficient transmission of rate cuts to the credit market, the central bank said in the bulletin. The trade policy outcomes in July, after the temporary tariff hiatus is over, and the future course of geopolitical events would likely shape medium-term economic prospects, the RBI said. "Going forward, as noted by the MPC (monetary policy committee) in its resolution, the MPC decided to remain data-dependent to chart the future course of monetary policy and strike the appropriate growth-inflation balance," it said.
The Independent
an hour ago
- The Independent
Country bans recreational cannabis again in major blow to tourism
Thailand is poised to recriminalise cannabis, a move set to dismantle a burgeoning industry estimated to be worth over £734 million. The trade has flourished since the substance was delisted from the country's narcotics register in 2022. The push to reintroduce stringent controls on recreational cannabis use follows a recent political shift within the ruling coalition. The Bhumjaithai Party, a key proponent of cannabis legalisation, withdrew from the government last week. The departure came amidst scrutiny over Prime Minister Paetongtarn Shinawatra's handling of a border dispute with Cambodia. In a decisive step late on Tuesday, Thailand's health ministry issued an order explicitly prohibiting the sale of cannabis for recreational purposes. Under the new mandate, any retail purchase will now necessitate a doctor's prescription. These regulations are expected to come into effect swiftly, once they are officially published in the Royal Gazette, a process that could occur within days. Three years ago, Thailand became one of the first countries in Asia to decriminalise the recreational use of cannabis, but without any comprehensive rules to govern the sector. Since then, tens of thousands of shops and businesses selling cannabis have sprung up across Thailand, many of them located in the country's tourism hubs. Thai Chamber of Commerce previously estimated the industry, which includes medicinal products, could be worth $1.2 billion by 2025. Unregulated access to cannabis has created serious social problems, particularly for children and young people, said government spokesman Jirayu Houngsub. "The policy must return to its original goal of controlling cannabis for medical use only," he said in a statement. The recriminalisation push has left some cannabis industry members like Punnathat Phutthisawong, who works at the Green House Thailand dispensary in Bangkok, stunned. "This is my main source of income," the 25-year-old worker said. "Many shops are probably just as shocked because a lot of them invested heavily." The cannabis sector could have transformed Thai agriculture, medicine and tourism, but uncertainty and policy reversals have stymied any sustainable growth, said cannabis activist Chokwan Kitty Chopaka. "The cannabis industry has become a hostage to politics," she said. On Wednesday, there was still a steady trickle of customers – mainly tourists – coming into cannabis shops in Bangkok 's Khao San Road area. Among them was Daniel Wolf, who was visiting from Australia. "There are shops everywhere, so how do they reverse this? I don't think they can," he said, " It's absolutely insane."
Reuters
2 hours ago
- Reuters
Trump's budget plan shifts wealth from young to old, analysts say
WASHINGTON, June 25 (Reuters) - U.S. President Donald Trump's sweeping tax-cut legislation would effectively transfer wealth from younger Americans to older generations, nonpartisan analysts say. Though the bill contains tax breaks for parents, newborns, private-school students and other younger Americans, those benefits would be outweighed by the trillions of dollars it would add to the $36.2 trillion national debt, they say. That could push down economic growth over the long term and leave younger people saddled with higher taxes and mortgage payments. "Future generations are kind of left holding the bag," said Kent Smetters, director of the Penn Wharton Budget Model. The nonpartisan research organization found that a 40-year-old earning close to the median income would effectively lose $7,500 over the course of a lifetime if the bill became law. A 70-year-old with the same income, by contrast, would end up $17,500 richer. Several factors contribute to this disparity. Younger workers, who typically earn less, would not benefit as much from the bill's income tax cuts compared to those at the peak of their earning years. They would also be more exposed to cutbacks in student aid and the Medicaid health program, which covers four out of 10 hospital births in the United States. "In the short term the benefits are certainly tilted towards higher earners, which is often a good proxy for age," said Jessica Riedl of the conservative Manhattan Institute. But the biggest factor, analysts say, is the $3 trillion the bill would add to the national debt. That is likely to push up interest rates in the years to come and require the government to devote a growing portion of its budget to debt service rather than other purposes. "There is an obvious intergenerational transfer here," said John Ricco of the Yale Budget Lab, which found that the bill would add $4,000 to the annual cost of a home mortgage in the year 2055, when today's newborns will be 30 years old. Republican lawmakers say the bill, which passed the House of Representatives and is now pending in the Senate, would help younger Americans by putting Medicaid on a more sustainable footing and boosting economic growth and entrepreneurship, which would help younger people entering the workforce. The bill also follows through on Trump's campaign promises by carving out new tax breaks for tipped income and overtime pay, which Republicans say could help younger workers in service and hourly wage jobs. The bill also would set up $1,000 savings accounts for newborns and expand a child tax break, though the details differ between the House and Senate versions of the bill. No. 2 House Republican Representative Steve Scalise said after the bill's passage in May that the legislation would increase take-home pay for a median income household with two children by $4,000 to $5,000. That calculation, however, does not factor in the increased costs many lower- and middle-income families would have to pay for health care, student loans and groceries due to the bill's cutbacks in those areas. The Congressional Budget Office and other outside analysts have found that those costs would outweigh any savings those households might gain from tax cuts, while the child tax credit and other targeted tax breaks also would not be fully available to low-income families. That pattern holds true for poor Americans of all ages. The bill includes a targeted tax break for people over 65 promised by Trump during last year's election, but many do not pay enough income tax to qualify for it, said Brendan Duke of the left-leaning Center on Budget and Policy Priorities. "The tax cuts basically do nothing for the lower-income half of seniors," he said. Still, those seniors benefit from another Trump campaign promise, as the bill spares Medicare, the health plan for seniors, and Social Security, the U.S. pension program, from the sort of cost-cutting it applies to Medicaid. Medicare and Social Security are growing rapidly as the population ages, crowding out other government spending, and are projected to run short of funds in 2033. But Trump and his Democratic rivals have both vowed to shield the two politically popular programs from restructuring, which will leave future generations to confront the problem. "I think ultimately Republican and Democratic lawmakers have been engaged in intergenerational theft for a long time," Riedl said.
