Thai central bank likely to cut rates by 25 bps to shore up economy
The Bank of Thailand logo is pictured in Bangkok, Thailand, January 30, 2025. REUTERS/Chalinee Thirasupa
BENGALURU :The Bank of Thailand (BOT) is likely to trim its key policy rate by 25 basis points on Wednesday to bolster a slowing economy, according to a Reuters poll, as a strong baht continues to weigh on tourism and exports, especially amid higher U.S. tariffs.
Despite the key rate standing at 1.50 per cent, one of the lowest among its peers, the central bank's minutes from an August meeting indicated that "monetary policy should remain accommodative to support the economy."
Months of negative inflation and the dovish stance of new Governor Vitai Ratanakorn have cemented expectations of a rate cut on October 8.
More than 70 per cent of economists, 19 of 26 polled by Reuters between September 29 and October 6, expect the BOT to reduce its one-day repurchase rate by 25 basis points to 1.25 per cent this week. Six economists forecast no change, while only one predicted a deeper cut of 50 basis points.
"Recent data indicate Thailand's growth momentum is faltering. Exports to the U.S. slowed materially, agricultural and industrial output weakened, and tourist arrivals remain subdued," said Krystal Tan, an economist at ANZ, noting the strong baht was also eroding export competitiveness.
The Thai baht surged more than 8 per cent on a year-to-date basis last month before easing slightly.
Still, some economists cautioned it was too soon to cut rates again.
"I think a rate cut is doubtful for this meeting," said Amonthep Chawla, head of the research office at CIMB Thai Bank.
"Either way, it's not right or wrong. It depends on the objectives of what they want to boost in the short term. I'm more concerned about the medium term, given that if something happens next year, we may not have enough buffer or policy space to tackle."
Looking ahead, just over 60 per cent of economists - 13 of 21 - expect the policy rate to be 25 basis points lower at 1.25 per cent by the end of 2025. The remaining analysts forecast a cut to 1.00 per cent, a view held by only one economist in the August poll.
Most economists expected rates to fall to 1.00 per cent by the end of March and stay there for the rest of the year.
The survey forecast economic growth to average 2.0 per cent this year and 1.8 per cent in 2026, with inflation averaging just 0.1 per cent this year and 0.6 per cent next.
"We expect the growth recovery not to be as solid in the second half of this year. We expect the recovery to come by the second half of next year, given there could be a prolonged drag from the trade war that would cause a fall in confidence in that period," CIMB's Chawla said.
He added that the economic recovery is likely to be supported by fiscal stimulus measures expected from the new government, aimed at easing living costs and boosting consumption.
(Other stories from the October Reuters global economic poll)
