New Bank of Thailand Chief Vows Easy Monetary Policy

The February meeting minutes from the Bank of Thailand revealed that most members favored a rate cut to keep financial conditions supportive of recovery, ease debt burdens for SMEs and households, and anchor medium-term inflation expectations amid rising downside risks. Two members, however, argued the 1.25% policy rate remained appropriate, noting earlier cuts were still filtering through the economy. The committee also flagged further downside risks to headline inflation, which could return to the target range more slowly than previously expected due to falling energy prices and possible government measures, while demand-driven pressures remain limited as growth stays below potential. Although the economy expanded faster than anticipated, activity was uneven across sectors, constrained by structural challenges and intensifying competition. Credit continued to contract, SME loan quality deteriorated, and liquidity remained tight amid restricted access to financing and a stronger baht.

The Bank of Thailand cut its benchmark interest rate by 25 bps to 1% at its February 2026 meeting, defying market expectations of a hold. The Committee voted 4-2 in favor of the cut. This marked the second consecutive reduction and the lowest level since September 2022, as the central bank seeks to support economic recovery, ease debt burdens for SMEs and households, and anchor medium-term inflation expectations. While economic growth in Q4 of 2025 was stronger than previously estimated, activity is expected to remain below potential in 2026 and 2027 and uneven across sectors, reflecting structural constraints and intensifying competition. In addition, downside risks to inflation are expected to increase compared with earlier assessments due to falling energy prices, possible additional government measures, and subdued demand. Inflation is now projected to return to the target range later than previously assessed, shifting from the first half of 2027 to the second half.

The Bank of Thailand lowered its benchmark interest rate by 25 bps to 1.25% at its December 2025 policy meeting, as widely expected. The central bank has cut its key rate five times over the past year, for a total reduction of 125 bps, to support a sluggish economy grappling with US tariffs, high household debt, a strong baht, and political uncertainty ahead of elections in early February. The move brings the rate to its lowest level since December 2022. On the economic outlook, the BoT kept GDP forecasts at 2.2% for this year but revised the 2026 forecast down to 1.5% from 1.6%. The headline inflation forecast for this year was lowered to -0.1% from flat previously, and for 2026 it was reduced to 0.3% from 0.5%. The BoT said the subdued inflation reflected lower global energy prices and government subsidies and noted that deflationary risks were low. The MPC reaffirmed its readiness to adjust monetary policy as appropriate in line with the evolving economic and inflation outlook.