Central Bank cuts rates in December

Latest bank decision: At its meeting on 17 December, the Bank of Thailand (BOT) unanimously decided to cut the policy rate by 0.25% points to 1.25%. The decision matched market expectations.

Bank cuts rates to support the economy: The BOT decided to cut rates to support economic growth. The Bank lowered its 2026 projection for GDP growth and noted that the economy remains below potential amid decelerations in private spending and merchandise exports, while credit growth continues to contract and credit quality to vulnerable groups is deteriorating. Regarding inflation, the BOT cut its projections for the headline rate in 2025–2027 and now sees price pressures returning to the 1.0–3.0% target range by the first half of 2027, partly due to weak domestic demand. Lastly, a strong Thai baht vs the USD gave the BOT further scope to reduce interest rates.

Rate cuts are not over: Our Consensus is for about 25 basis points of additional rate cuts by end-2026, as our panelists see inflation below target and GDP growth below 2025’s level. Still, a minority expect the BOT to remain on hold through 2027. Lower-than-expected price pressures and economic growth pose downside risks to the policy rate.

Panelist insight: Nomura’s Euben Paracuelles and Yiru Chen commented on the outlook: “We think the BOT’s tone was dovish (versus our expectation that it will be more neutral), and is supportive of our view that the BOT’s cutting cycle is not over. We still forecast the BOT to cut its policy rate by another 25bp to 1.0% at its next MPC meeting in February, premised on our view that the growth outlook will disappoint the BOT’s forecasts of 2.2% and 1.5% for 2025 and 2026, respectively, and that the economy is likely to enter a recession in Q4. Political uncertainty has also increased with parliament dissolved and elections called earlier on 8 February, adding to growth headwinds. Indeed, we see a rising risk that the BOT could deliver more cuts to below 1%. We believe deflation is broadening, with nominal GDP growth plummeting and turning negative soon without a major shock.”

How should you choose a forecaster if some are too optimistic while others are too pessimistic? FocusEconomics collects Thai interest rate projections for the next ten years from a panel of 23 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts and averaged to provide one Consensus Forecast you can rely on for each indicator. By averaging all forecasts, upside and downside forecasting errors tend to cancel each other out, leading to the most reliable interest rate forecast available for Thai interest rate.

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