The Bank of Thailand voted unanimously to reduce its key interest rate by 25 basis points on Wednesday, bringing the policy rate down to 1.25%. The central bank’s decision aligns with projections from numerous analysts and economists, who cited a sluggish macroeconomic backdrop as a primary driver for the cut.
In particular, Thailand’s GDP figures have fallen short of expectations. Meanwhile, subdued inflation has eased pressure on monetary policy to stay elevated. The strengthening of the baht in recent weeks was also a consideration; the rate cut aims to temper the currency’s appreciation, which could benefit the nation’s export sector. Geopolitical tensions and prolonged global conflicts, which may weigh on future trade and investment, were also highlighted as risk factors.
Typically, lower interest rates are favorable for financial companies and stocks with floating-rate debt, including the finance sector, utilities, and high-dividend equities. The non-bank financial group stands to gain, as do companies in the tourism sector, given that a softer baht could attract more foreign visitors by making travel to Thailand less expensive.
