Central Bank unexpectedly decreases rates in October

Bank delivers surprise cut: At its meeting on 16 October, the Monetary Policy Committee of the Bank of Thailand (BOT) decided to cut the policy rate by 25 basis points to 2.25%; the move was not unanimous, with two of the five members voting for a hold. The decision marked the first cut since 2020 and ran counter to market expectations of a hold. That said, it aligned with persistent government calls for monetary easing.

Favorable inflation prospects enable cut: The BOT determined that the economic outlook suggests a neutral policy rate is appropriate given the current economic outlook. Headline inflation stood at 0.6% in September, and the Bank noted that it projects price pressures to gradually return to the 1.0–3.0% target range by the end of 2024 and stay within target in 2025 as a whole. Additionally, the cut aims to alleviate the debt-servicing burden for borrowers.

BOT to cut further in 2025: At a subsequent press briefing, Assistant Governor Sakkapop Panyanukul stated that the cut did not mark the beginning of an easing cycle, affirming that the BOT would likely pause to assess the impact of the decision before reducing rates again. Our Consensus is for the Bank to stand pat at its last meeting of 2024 on 18 December, before delivering another 25 basis points cut in 2025, which could come as early as Q1.

Panelist insight: UOB’s Enrico Tanuwidjaja and Sathit Talaengsatya expect the Bank to cut rates in 2025: “Based on today’s policy decision, as financial stability remains its policy priority, we expect the BOT to keep the policy rate unchanged at 2.25% during its final meeting of 2024 on 18 Dec. We anticipate another 25-bps rate cut in the first quarter of 2025, with the policy rate remaining at 2.0% throughout the rest of the year.” Meanwhile, Nomura analysts expect the BOT to stay on hold throughout 2025: “We still forecast the BOT to leave its policy rate unchanged at 2.25% in December and throughout 2025. Today’s? hawkish tone, in our view, suggests that the BOT may assess that the scope for more cuts is limited, especially as soon as the next policy meeting in December. We believe that growth and inflation will continue to undershoot the BOT’s expectations, but the BOT’s main argument for a cut today suggests that the debt concerns were likely the main driver for a policy adjustment for now.”

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