[BANGKOK] The Bank of Thailand (BOT) held its key interest rate unchanged and unexpectedly raised its growth forecast for 2025, even as it assessed risks ranging from US tariffs to the conflict in the Middle East.
The central bank’s seven-member Monetary Policy Committee voted 6-1 to maintain the one-day repurchase rate steady at 1.75 per cent at Wednesday’s (Jun 25) meeting as predicted by 15 of 21 economists surveyed by Bloomberg. The rest forecast a quarter-point cut.
The BOT now sees 2025 economic growth at 2.3 per cent, a slight improvement from the range of 1.3 per cent to about 2 per cent forecast in April. The revision was mainly due to improving exports and manufacturing in the first-half of the year, due to frontloading on tariff concerns, BOT assistant governor Sakkapop Panyanukul said at a briefing after the decision, with 2025 growth unlikely to slow to below 2 per cent if there is no major shock.
“Looking ahead, the economy is expected to slow down in the second half of 2025, as merchandise exports are facing headwinds from US tariffs and private consumption will moderate in line with weakening income and consumer confidence,” the MPC said.
Growth will likely slow to 1.7 per cent in 2026.
Following the first back-to-back cut since 2020, Wednesday’s decision to hold the key rate reflected “high uncertainty and limited policy space,” the MPC said. Governor Sethaput Suthiwartnarueput had warned in May that the BOT had limited policy “ammunition” after 75 basis points of rate cuts since October.
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Previous policy rate cuts have already provided some cushion against the prevailing risks, the MPC said. “The committee deems that monetary policy should be accommodative to support the economy looking forward.”
The baht gained 0.2 per cent versus the dollar to 32.612 as of 2.30 pm in Bangkok on Wednesday, strengthening in tandem with the Malaysian ringgit and the Indonesian rupiah as jitters about hostilities in the Middle East eased. The benchmark Stock Exchange of Thailand Index traded 0.5 per cent higher after the decision.
Last week’s fracture in the ruling coalition adds to risks for South-east Asia’s economy, just as the government holds talks to avert a threatened 36 per cent tariff on exports to the US. Continued attacks in Israel and Iran are also spurring global oil prices higher, posing a risk to Thailand, which imports for its fuel needs.
Also underlining the improved full-year outlook is the BOT’s view that the trade war could be less severe. The BOT’s base case assumes an 18 per cent tariff rate will be applied to Thailand – half the rate announced in April – and 10 per cent for other countries.
Still, consumption is also softening, the number of foreign tourists is on the decline, and businesses are facing challenges from cheaper imports, the BOT said.
UBS Group has downgraded Thai stocks to neutral from overweight on concerns over policy direction and investor sentiment.
Meanwhile, price pressures are seen remaining modest. Headline inflation is estimated to remain low at 0.5 per cent this year and 0.8 per cent in 2026, below the central bank’s 1 per cent to 3 per cent target. The BOT also sees the core gauge coming in at 1 per cent in 2025 and 0.9 per cent in 2026.
“The Committee assesses that the economic outlook remains highly uncertain,” it said. “It stands ready to adjust monetary policy as appropriate in response to future trends and risks concerning both the economy and inflation.”
Thailand remains one of South-east Asia’s economic laggards, though exports surged the most since early 2022 in May as companies rushed to stockpile goods before US tariffs hit. Authorities have begun long-delayed talks with the US in a bid to reduce the Trump administration’s threatened levy.
Today’s decision is one of the last under Governor Sethaput Suthiwartnarueput, who will complete his five-year term on Sep 30. An independent selection panel shortlisted Vitai Ratanakorn, president of the Government Savings Bank, and BOT Deputy Governor Roong Mallikamas from a list of six applicants who were interviewed on Tuesday. BLOOMBERG
