BANGKOK — The Bank of Thailand (BOT) reduced its benchmark interest rate by a quarter of a percentage point on Wednesday, moving to a more accommodative monetary stance in response to a slowing economy and heightened external risks. The unanimous decision by the Monetary Policy Committee (MPC) lowers the policy rate from 1.50% to 1.25%, effective immediately.

Thai Baht Hits Four-Year High, Intensifying Pressure on Central Bank

The committee stated the cut was necessary to ensure financial conditions support a fragile recovery and to ease the debt-servicing burden for vulnerable households. The central bank noted that the easing would also enhance the effectiveness of existing government financial measures.

In a downward revision of its economic forecasts, the BOT now projects gross domestic product (GDP) growth of 2.2% for 2025, followed by a sharper deceleration to 1.5% in 2026 before a modest recovery to 2.3% in 2027. The bank pointed to a persistent manufacturing slump and a decline in short-haul tourist arrivals as major factors dampening activity in the second half of this year.

Bank of Thailand signaling interest rates hike

Recent natural disasters have added to the economic pressure, with severe flooding in Southern Thailand expected to suppress activity into early next year. For 2026, the central bank warned that private consumption is likely to weaken as household incomes soften, while the export sector faces ongoing risks from potential new U.S. trade tariffs. The rate cut reflects the bank’s proactive move to mitigate these mounting headwinds.

-Thailand News (TN)