Kiatnakin Phatra Securities (KKPS) wrote in its research paper that Thailand’s Monetary Policy Committee (MPC) unanimously voted 6–0 to cut the policy rate by 0.25 percentage points to 1.50%. This decision, which aligns with KKP Securities’ forecast, was aimed at ensuring more accommodative financial conditions to support business adjustments and ease the burden on vulnerable groups, despite the economic outlook remaining largely unchanged from previous assessments. This meeting also marked the final MPC session for the outgoing central bank governor, Sethaput Suthiwartnarueput.
Economic Outlook and Inflation:
The MPC maintained its economic growth projection, in line with previous assessments. While growth in the first half of the year was supported by front-loaded exports and manufacturing, the second half is expected to slow. This deceleration is attributed to US trade policies and a decline in tourist arrivals, both of which are likely to weigh on the economy. The committee also highlighted the need to monitor the impact of transshipment tariffs and rising competition from imported goods.
On inflation, headline inflation is expected to remain subdued due to falling raw food prices—supported by favourable weather boosting supply—and continued declines in energy prices. The MPC reiterated that core inflation remains stable, with no signs of a broad-based decline in prices across goods and services.
Concerns over Credit Growth and Asset Quality:
A key concern for the MPC is negative credit growth, particularly affecting small and medium-sized enterprises (SMEs) and low-income households. This is being exacerbated by increased credit risks, higher debt repayments, and reduced credit demand from large businesses amid heightened economic uncertainty. Credit quality has continued to deteriorate, especially for SME and housing loans. The committee noted it will closely monitor these developments given their potential impact on overall economic activity.
KKP’s Policy Outlook:
KKP Securities does not view this rate cut as a “panic move” or a shift toward an aggressively dovish stance, despite the MPC’s previously hawkish tone. Instead, it reinforces their view that the Bank of Thailand avoids explicit forward guidance, preferring to adjust policy on a meeting-by-meeting basis. KKP Securities maintains its forecast for two additional rate cuts by the first quarter of 2026, which would bring the terminal rate to at least 1.0%. This projection is based on expectations that economic and inflation trends will remain weak, necessitating further easing.
