Bangkok: SCB EIC anticipates that the Monetary Policy Committee (MPC) will reduce interest rates twice more this year, bringing the rate to 1.25% by the close of 2025. This forecast persists despite an improved economic outlook for the current year.
According to Thai News Agency, the Economic and Business Research Center of Siam Commercial Bank (SCB EIC) disclosed that the MPC recently decided, with a 6:1 vote, to maintain the policy interest rate at 1.75%. One committee member advocated for a 0.25% rate reduction. The decision to maintain the rate is based on the assessment that prior reductions have sufficiently mitigated certain economic risks. The MPC believes that a relaxed monetary policy is necessary for future economic support, emphasizing the importance of timing and the effectiveness of interest rate modifications. Given the prevailing uncertainty and limited policy options, sustaining the current rate is deemed appropriate amid economic deceleration and heightened risks in the latter half of the year.
The MPC assesses that the probability of Thai economic expansion falling below 2.0%YOY this year is slim, despite the persistent uncertainty in global trade policy. It projects a 2.3%YOY economic expansion for Thailand in 2025, an increase from the prior 2.0%YOY projection. However, for 2026, the expectation is a 1.7%YOY expansion, slightly down from the earlier 1.8%YOY forecast. These projections account for the full impact of the government's 157 billion baht economic stimulus budget and the current Thai-Cambodian situation, excluding political factors. The MPC underscores that future interest rate adjustments must be timely to optimize monetary policy, considering the limited policy space. Moreover, interest rate cuts might be considered if financial conditions worsen and diverge from economic fundamentals.
Nevertheless, SCB EIC maintains its stance that the MPC will cut the policy interest rate twice more this year, reaching 1.25% by the end of 2025. This move is expected to align monetary policy with the anticipated economic slowdown commencing in the second half of 2025 and extending into 2026.