Citibank Anticipates Interest Rate Cut by Bank of Thailand
An economist projects a reduction in the policy interest rate to bolster economic resilience and manage inflation.
An economist from Citibank has forecasted that the Bank of Thailand (BOT) will likely lower the policy interest rate again later this year, specifically in August, bringing it down from 2.0% to 1.75%.
This adjustment is anticipated as a strategy to enhance the Thai economy's resilience against potential risks in 2025 and to prevent inflation from dipping below target levels for a second consecutive year.
On February 26, 2024, the BOT's Monetary Policy Committee (MPC) made a decision to reduce the policy interest rate by 25 basis points, decreasing it from 2.25% to 2% per annum.
The MPC articulated that this rate cut was intended to stimulate economic growth, manage inflation effectively, and support financial stability in the face of global competition and domestic challenges.
The economist further noted that another 25-basis-point cut is likely to be considered in August, particularly if the economic growth during the first half of the year falls short of expectations.
Furthermore, various factors could influence this potential rate cut, including rising protectionist policies from the United States, an inflation rate lower than expected, and increasing risks within loan markets.
However, challenges remain, notably the high level of household debt, which stands at nearly 89% of gross domestic product (GDP) as of the fourth quarter of 2024. This ratio has increased from a lower level of below 85% of GDP during the periods when the policy rate was at 1.5% in both 2015 and 2019. Any further cuts that might push the rate below 1.75% could encounter limitations due to this elevated household debt ratio.
This adjustment is anticipated as a strategy to enhance the Thai economy's resilience against potential risks in 2025 and to prevent inflation from dipping below target levels for a second consecutive year.
On February 26, 2024, the BOT's Monetary Policy Committee (MPC) made a decision to reduce the policy interest rate by 25 basis points, decreasing it from 2.25% to 2% per annum.
The MPC articulated that this rate cut was intended to stimulate economic growth, manage inflation effectively, and support financial stability in the face of global competition and domestic challenges.
The economist further noted that another 25-basis-point cut is likely to be considered in August, particularly if the economic growth during the first half of the year falls short of expectations.
Furthermore, various factors could influence this potential rate cut, including rising protectionist policies from the United States, an inflation rate lower than expected, and increasing risks within loan markets.
However, challenges remain, notably the high level of household debt, which stands at nearly 89% of gross domestic product (GDP) as of the fourth quarter of 2024. This ratio has increased from a lower level of below 85% of GDP during the periods when the policy rate was at 1.5% in both 2015 and 2019. Any further cuts that might push the rate below 1.75% could encounter limitations due to this elevated household debt ratio.
