Thailand: Central Bank leaves rates unchanged in December
Central Bank stands pat despite government pressure to cut: At its meeting on 18 December, the Monetary Policy Committee of the Bank of Thailand (BOT) unanimously voted to maintain the policy rate at 2.25%, in line with market expectations. The move followed October’s surprise cut and defied government pressure to reduce rates further.
Robust economic and inflation outlook motivates the hold: Despite acknowledging challenges to the domestic economy arising from external competition and heightened policy uncertainty abroad, likely vis-à-vis Donald Trump’s upcoming presidency in the U.S., the BOT maintained an upbeat outlook on the economy and inflation. The authority deemed that the current level of the policy rate was consistent with the economy growing close to potential and inflation moving towards the 1.0–3.0% target range in 2025. That said, the authority noted higher risks to economic recovery ahead, as well as recent depreciatory pressures on the baht due to shifting market expectations on U.S. rates.
Modest rate cuts expected in 2025: At a subsequent press briefing, Assistant Governor Sakkapop Panyanukul stated that the BOT remains neutral in its policy stance and that it is neither loosening nor tightening, hinting at an extended pause in the coming months. Nevertheless, the majority of our panelists expect the BOT to deliver a single 25 basis point cut this year in Q1. Weaker-than-expected economic growth is a downside risk to the policy rate, while a weaker-than-anticipated baht and softer-than-expected U.S. rate cuts are upside risks.
The BOT will reconvene on 26 February.
Panelist insight: Nomura analysts Charnon Boonnuch and Euben Paracuelles said:
“We maintain our forecast that the BOT will deliver a total cut of 50bp in 2025, reflecting our view of the negative feedback loop between tightening financial conditions and weak economic activity. […] In terms of timing, we expect the BOT to skip the cut again at the next MPC meeting in February before delivering a 25bp cut in April. […] Our assumption is the Trump tariffs get phased in from Q1 and raise concerns about global trade protectionism which could prompt a downgrade in BOT’s growth outlook at that point, and hence justifying a rate cut.”
United Overseas Bank analyst Sathit Talaengsatya took a less dovish view:
“Looking ahead, we expect BOT’s next move will be one 25-bps rate cut in the first quarter of 2025, with the policy rate remaining at 2.00% throughout the rest of the year. At this policy rate level, it is considered neutral, aligning with the BOT’s assessment while preserving sufficient policy space to respond to potential shocks. […] However, additional rate cuts cannot be ruled out if external challenges intensify or downside risks to domestic growth become more severe.”