Bank of Thailand Unexpectedly Lowers Key Rate to 1%

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.

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.