Bangkok Post - Bank of Thailand cuts interest rate to 1.50%. The Bank of Thailand has reduced its key interest rate by a quarter percentage point, its fourth cut in 10 months, as it looks to support a sluggish economy grappling with negative inflation and the impact of US tariffs.

Bank of Thailand cuts interest rate to 1.50%

The Bank of Thailand has reduced its key interest rate by a quarter percentage point, its fourth cut in 10 months, as it looks to support a sluggish economy grappling with negative inflation and the impact of US tariffs.

The Monetary Policy Committee (MPC) voted unanimously on Wednesday to reduce the one-day repurchase rate to 1.50%, the lowest in more than two years, in the final policy meeting led by outgoing governor Sethaput Suthiwartnarueput.

The committee had held the key rate at its June meeting following back-to-back cuts in February and April. It had also cut rates in October last year.

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Nineteen of 26 economists surveyed by Reuters predicted the policy rate would be 1.25% by the end of 2025, one forecast 1.00% and seven said it would stay at 1.50%.

Headline inflation has been in negative territory since April and has consistently undershot the central bank's 1-3% target range throughout this year. The committee also acknowledged that more signs of weakness in the economy are emerging.

"The Thai economy in 2025 and 2026 is projected to expand close to the previous assessment. Nevertheless, US trade policies will exacerbate structural problems and weaken competitiveness," the MPC said in a statement. "Additionally, certain sectors of the economy have become more vulnerable, particularly SMEs." 

The MPC in June forecast economic growth of 2.3% for the year, but said on Wednesday that 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.

"These developments will affect income for SMEs, employees and self-employed workers. Private consumption is expected to be subdued due to weakening consumer confidence and income trajectory."

It also noted that credit growth remains negative due to increased credit risks, particularly in small businesses and low-income households, alongside heightened debt repayments and reduced credit demand by large businesses amid heightened economic uncertainty.

The next MPC meeting will take place on Oct 8, a week after new governor Vitai Ratanakorn takes office, succeeding Mr Sethaput who has reached retirement age.