Bangkok, Feb 25 - In a surprise decision at its initial policy review of the year, Thailand's central bank moved to lower its one-day repurchase rate by 25 basis points to 1.00%. The monetary policy committee approved the cut by a 4-2 vote, an outcome that contrasted with most market expectations.
Only six of 27 economists surveyed before the meeting had anticipated a quarter-point reduction; the remainder had forecast no change to the policy setting. The announcement prompted the Thai baht to pare some of its earlier gains, although the currency remains about 1.3% stronger against the U.S. dollar so far this year. Thailand's main stock market reacted positively, extending gains to be up roughly 1.8% on the day.
In its statement accompanying the rate decision, the central bank said that economic growth is projected to remain below potential in 2026 and 2027 and to be uneven across sectors, attributing that outlook to structural impediments and intensified competition. Officials have been easing policy for several months: Wednesday's move marks the sixth cut since October 2024, reducing the policy rate by a cumulative 150 basis points. The rate was also lowered at the previous review in December.
BOT Governor Vitai Ratanakorn has argued that both fiscal and monetary measures should be used to lift growth toward a 2.7% potential for this year. That target contrasts with the central bank's current expectation for 1.9% expansion, and a December forecast that had projected 1.5% growth. The Thai economy recorded 2.4% growth last year.
Policymakers pointed to several ongoing constraints on the economy. The central bank highlighted rising U.S. tariff uncertainty, elevated household debt levels and the baht's recent strength as factors that have complicated the recovery since the pandemic. The currency's gains this year build on a roughly 9% appreciation against the dollar in the previous year, a trend the central bank said is tightening financial conditions for exporters.
Exporters are especially vulnerable where products face intense price competition and low profit margins, the central bank said, noting that the baht's appreciation has increased pressure on those firms' competitiveness. The statement also flagged other uncertainties that warrant close monitoring: the possible trajectory of U.S. tariff measures, a delay to the 2027 budget, and the need for small and medium enterprises to adjust amid heightened competition, constrained credit access and currency appreciation.
On trade policy uncertainty, the central bank referenced comments by U.S. President Donald Trump that he will set global tariffs at 15% after the Supreme Court struck down his tariff regime - a level below the 19% rate that had been levied on Thailand - while noting that uncertainty around those measures persists.
Political developments were also noted in the bank's assessment. Prime Minister Anutin Charnvirakul's Bhumjaithai party will lead a new coalition government, expected by April after the party's strong showing in a general election earlier this month. The central bank said that this outcome reduces concerns about further instability, even as officials caution that raising growth remains a challenge. Finance Minister Ekniti Nitithanprapas has indicated the incoming government will continue existing economic policies.
The Bank of Thailand scheduled its next interest rate meeting for April 29.
Key points
- The Bank of Thailand cut the policy rate by 25 basis points to 1.00% in a 4-2 vote at its first review of the year, an unexpected move for most economists.
- The decision is the sixth reduction since October 2024, bringing total easing to 150 basis points, as authorities aim to support growth amid a strong baht and tariff-related uncertainty.
- Sectors likely most affected include exporters and tourism, which face competitiveness pressure from the baht's appreciation; financial conditions for SMEs are also a concern.
Risks and uncertainties
- Unresolved U.S. tariff measures could continue to cloud trade prospects and weigh on export-dependent sectors.
- A delay in the 2027 budget and limited access to credit for SMEs may hamper firms' ability to adjust to competition and currency swings.
- The baht's continued appreciation may further tighten financial conditions for low-margin exporters and tourism-related businesses.