Thailand’s Monetary Policy Should Remain Accommodative

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.

The Bank of Thailand (BoT) will keep monetary policy accommodative to support economic recovery and remains ready to adjust policy settings as needed, the minutes of the central bank’s October 8 policy meeting showed on Wednesday. The committee stated that policy should remain accommodative and noted that the impact of earlier rate cuts was still feeding through to the economy. At the meeting, the monetary policy committee unexpectedly voted 5-2 to leave the one-day repurchase rate unchanged at 1.50%. The central bank has cut its key rate four times over the past year, for a total reduction of 100 basis points, to support the economy, which is grappling with US tariffs, high household debt, and a strong baht. The central bank expects economic growth of 2.2% this year and 1.6% next year. For the first half of 2025, the economy expanded by 3.0%. Last year’s growth of 2.5% lagged that of its peers.

The Bank of Thailand kept its benchmark interest rate unchanged at 1.5% during its October 2025 policy meeting, defying market expectations of a cut to 1.25% and remaining at its lowest level since February 2023. Headline inflation is now forecast at 0% in 2025 and 0.5% in 2026, with a gradual return to the central bank’s 1%–3% target band anticipated by early 2027. The core inflation rate is expected to remain stable at 0.9% in both 2025 and 2026. Consumer prices in Thailand declined by 0.72% year-on-year in September 2025, marking the sixth consecutive month of deflation and remaining well below the central bank’s target range. Meanwhile, Thailand’s GDP is projected to grow by 2.2% in 2025 and 1.6% in 2026. The country's economy expanded by 2.8% year-on-year in Q2 2025, representing the slowest pace of growth since Q2 2024. Finally, the MPC reaffirmed its accommodative stance and signaled its readiness to adjust policy in response to evolving economic and inflation conditions.