The Monetary Policy Committee (MPC) unanimously decided to cut the policy interest rate by 0.25% to 1.25% per year from the previous 1.50%, effective immediately, to help support Thailand through the economic slowdown crisis.
Mr. Sakkaphop Phanyanukul, Secretary of the Monetary Policy Committee (MPC). He announced the outcome of the MPC’s final meeting of 2025, stating that the committee unanimously agreed to reduce the policy interest rate by 0.25% per year from 1.50% to 1.25%, effective immediately. This decision reflects the outlook for Thailand's economy in 2026 and 2027, which is expected to slow down compared to the first half of 2025 due to weaker private consumption linked to income trends and export impacts from U.S. tariff measures. Meanwhile, tourism is gradually recovering. General inflation is expected to remain low, mainly influenced by energy and fresh food prices, with limited demand-driven inflation pressures amid economic growth below potential. Overall credit continues to contract, and credit quality among vulnerable groups has worsened, with SMEs facing liquidity pressures due to difficulties accessing credit and a stronger baht.
The committee views that monetary policy can be further eased given the clear slowdown and rising risks in the economy, to ensure financial conditions support economic recovery and help alleviate debt burdens for vulnerable groups, while enhancing the effectiveness of financial and other government policies. Therefore, it deemed appropriate to reduce the policy interest rate by 0.25% in this meeting.
Thailand’s economic growth is projected at 2.2%, 1.5%, and 2.3% for 2025, 2026, and 2027 respectively. The economy in the second half of this year is slowing due to temporary factors in manufacturing, a decline in short-haul tourist numbers, and flooding in the southern region expected to affect economic activities into early next year.
For 2026, economic growth is expected to slow compared to this year, driven by weaker private consumption aligned with income trends and exports affected by U.S. tariff measures, while the tourism sector is gradually recovering.
The economy in 2027 is expected to recover but remain below potential, mainly propelled by the services sector’s recovery, while exports and manufacturing continue to face pressure from intense competition. Looking ahead, risks include potential additional U.S. tariff measures, delays in the 2027 budget process, and business adjustments, especially SMEs still challenged by competition and access to credit. The committee notes that Thailand’s low economic growth partly results from structural factors, requiring a mix of policies to enhance business sector competitiveness.
General inflation for 2025, 2026, and 2027 has been revised downward from previous estimates, expected at -0.1%, 0.3%, and 1.0% respectively, and is projected to gradually return to the target range in the first half of 2027. The low inflation reflects lower global energy prices and government subsidies for living costs, along with limited demand-driven inflation pressures. The risk of deflation is considered low, as prices for goods and services have not broadly declined. The committee recommends closely monitoring deflation risks. Core inflation for 2025, 2026, and 2027 is expected to remain stable at 0.8%, 0.8%, and 1.0% respectively, while medium-term inflation expectations have slightly decreased but remain anchored within the target range.
Interest rates in financial institutions and money markets have decreased following previous policy rate cuts, helping to reduce financing costs and alleviate debt burdens for businesses and households. However, credit continues to contract, partly reflecting private sector spending and investment slowdowns amid high uncertainty. Financial institutions remain cautious in lending to high-credit-risk borrowers, especially SMEs and low-income households. The committee recommends monitoring credit growth and supporting targeted financial measures to assist vulnerable groups.
The Thai baht has appreciated against the U.S. dollar, leading regional currencies, influenced by revised expectations of the U.S. Federal Reserve’s policy rate outlook and Thailand-specific factors. The committee advises enhancing monitoring of baht movements closely and considering measures for transactions that significantly pressure the baht.
Within the framework of monetary policy aimed at maintaining price stability alongside supporting sustainable economic growth and financial system stability, the committee believes monetary policy should remain accommodative to support economic recovery. It will monitor economic and financial developments and risks, ready to adjust policy to suit changing economic and inflation trends. At the same time, attention must be paid to long-term financial system stability and the limited capacity of monetary policy to address unexpected events.
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