Thailand’s Monetary Policy Committee (MPC) voted 6 to 1 to maintain its policy rate at 1.75 percent during its meeting on 20 and 25 June 2025, the meeting minutes published on July 9th showed. This decision comes despite an upward revision to the 2025 economic growth forecast, reflecting the committee’s cautious outlook amid high uncertainties and limited policy space.
The Thai economy saw stronger-than-anticipated growth in the first half of 2025, primarily supported by manufacturing production and front-loaded exports—particularly to the United States ahead of tariff changes—and continued expansion in electronics exports. However, growth is projected to moderate significantly in the second half of 2025 and into 2026, with forecasts of 2.3 percent and 1.7 percent for those years, respectively. This slowdown is attributed to anticipated U.S. tariffs, weakening private consumption across income groups, and an expected annual decline of 2.5 million foreign tourist arrivals, notably Chinese visitors.
The economy also faces persistent structural pressures, including intense competition from low-cost imports, supply outpacing demand in sectors like restaurants, and shifting consumer behaviour towards online shopping, which has particularly impacted small retailers.
Headline inflation is projected to remain subdued at 0.5 percent in 2025 and 0.8 percent in 2026, largely driven by declining energy and raw food prices. Core inflation is forecast at 1.0 percent and 0.9 percent for the same periods. The MPC noted that this low inflation is primarily due to supply-side and structural factors, not a broad-based price decline, and that monetary policy has limited efficacy in addressing these issues. Medium-term inflation expectations remain anchored within the 1–3 percent target.
Financial conditions show caution, with overall credit contracting due to lower demand and increased debt repayments. Credit quality has deteriorated, especially for SME and housing loans. The baht remains volatile against the U.S. dollar, influenced by global trade policies and geopolitical tensions.
The majority of the MPC members opted to maintain the rate, emphasising the importance of preserving policy space to mitigate potential risks from unforeseen events, especially as the impact of trade policy is expected to intensify. They also highlighted the limited effectiveness of monetary policy in an environment of low interest rates, high economic uncertainties, and challenges stemming from declining competitiveness and fixed-rate loans. A lone dissenting member argued for a 0.25 percentage point cut, believing it would help alleviate interest burdens and support sectors affected by the weakening economic outlook and deteriorating credit quality. The committee affirmed that monetary policy remains accommodative and stands ready to adjust based on future economic and inflation outlooks.
