(Feb 25): The Bank of Thailand unexpectedly lowered its key interest rate in a split decision, stepping up support for the economy as policymakers seek to shore up a fragile recovery amid persistent domestic and external uncertainty. The baht erased earlier gains.
The central bank’s Monetary Policy Committee voted four to two on Wednesday (Feb 25) to cut the one-day repurchase rate by 25 basis points to 1%, the lowest level since September 2022. Only three of 23 economists surveyed by Bloomberg had predicted the move, with the rest expecting no change. The meeting was attended by six members, with one seat on the committee still vacant.
“Economic growth is projected to remain below potential in 2026 and 2027 and uneven across sectors, reflecting structural impediments and intensified competition,” the central bank said in a statement. “The present level of the policy interest rate reflects a sufficiently accommodative monetary policy stance and aligns with the economic outlook while being conducive to the gradual return of inflation to the medium-term target range.”
The Thai baht was little changed at 31.040 per dollar, erasing an earlier advance.
The surprise easing comes despite stronger-than-expected growth last quarter. While exports rose at the fastest pace in four years and political uncertainty has eased after the election this month, policymakers remain wary that high household debt and tight financial conditions could disrupt the recovery in consumption and investment.
Thailand also faces mounting external risks, from geopolitical tensions to volatile global markets and climate-related disruptions. With negative inflation prints for the past 10 months, officials have scope to provide further support for the economy as they seek to sustain the recovery without jeopardising longer-term financial stability.
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