Thai Times

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Sunday, Aug 03, 2025

Bank of Thailand Cuts Interest Rate Amid Trade Turmoil

Bank of Thailand Cuts Interest Rate Amid Trade Turmoil

Central bank reduces key rate to support an underperforming economy facing uncertainty over US tariffs.
The Bank of Thailand has cut its key interest rate by a quarter point for the second consecutive meeting in an effort to support the country's underperforming economy, which is facing uncertainty due to steep US tariffs.

The Monetary Policy Committee voted 5-2 to reduce the one-day repurchase rate by 25 basis points to 1.75%, the lowest level in two years.

This move follows a similar reduction at the previous meeting in February.

According to a Reuters poll of 28 economists, 20 had predicted the key rate would be cut this week, while eight expected no policy change.

The central bank stated that the Thai economy is projected to expand at a slower pace than anticipated, with more downside risks due to uncertainty in major economies' trade policies and a decline in tourism.

The economy is now forecasted to grow by 2% at best, down from an earlier forecast of 2.5%.

Thailand has been affected by both a deadly earthquake in March and the prospect of 36% tariffs for exports to the US.

Prime Minister Paetongtarn Shinawatra is attempting to secure negotiations with the US President's administration, and the government is considering measures to alleviate the local impact.

Moody's Ratings downgraded Thailand's credit rating outlook to negative from stable, citing risks that economic and fiscal strength will weaken further.

The sovereign rating was affirmed at an investment-grade Baa1.

Despite the weak economic backdrop, the baht has gained over 11% against the dollar over the past year, making it the best performer among Asian currencies tracked by Bloomberg.

The central bank's decision to lower its policy rate is expected to continue this year, with some predicting a year-end rate of 1.25%.

This would bring the rate below the levels seen in 2018-19, when Thailand weathered an earlier US-China trade war with a less direct impact.
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