Thai Central Bank Signals Limited Impact of Key Rate on GDP Growth

Thai Central Bank Signals Limited Impact of Key Rate on GDP Growth

The Bank of Thailand (BOT) maintained its policy rate at 1.75% following a recent monetary policy committee meeting, despite renewed political tensions at home and uncertainty abroad. The decision, which came after two consecutive rate cuts, was a surprise to some economists who had anticipated a further reduction [1].

The BOT's decision to hold the rate steady was largely influenced by Thailand's underlying macroeconomic conditions. The Southeast Asian economy has been grappling with tepid growth and inflation, which has led some economists to argue for a dovish policy bias [1]. However, the political turmoil in the country has added additional pressure to the already-weak economy. A key member of the ruling coalition has exited, leaving Prime Minister Paetongtarn Shinawatra's mandate hanging by a thread. This political upheaval increases the risk of another budget delay and a potential credit rating downgrade [1].

Furthermore, Thailand faces external headwinds. Under President Trump's "reciprocal" tariffs, the country could face a 36% duty if it fails to secure a trade deal with the United States [1]. Despite these challenges, the BOT's decision to hold the rate steady signals that it believes the impact on GDP growth will be limited.

The BOT's stance is supported by the fact that the Thai economy has shown resilience despite political instability and external pressures. However, the central bank will continue to monitor the situation closely and adjust its policy as needed.

References:
[1] Amanda Lee. "Thai Central Bank Holds Rate Amid Political Turmoil, Global Uncertainty." Dow Jones Newswires. June 25, 2025. https://www.marketscreener.com/news/latest/Thai-Central-Bank-Holds-Rate-Amid-Political-Turmoil-Global-Uncertainty-50328685/