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Thailand Defies Consensus with Policy Hold

• BOT holds rate at 1.50% in a 5-2 vote, surprising 70% of economists who expected a 25bp cut, citing limited policy space and timing concerns amid economic uncertainty.
• Economy faces 2H25-2026 slowdown from US tariff impacts, with exports declining and GDP growth revised to 2.2% (2025) and 1.6% (2026) despite a front-loaded boost.
• Credit contraction continues affecting vulnerable SMEs while inflation at -0.72% remains below target, but the dovish new governor signals potential future easing.

Thailand Cuts Rates Amid Trade War

• The BOT unanimously cut rates by 25bp to 1.50%, the fourth cut in 10 months, amid US trade policy headwinds and SME vulnerabilities.
• Growth forecasts were maintained at 2.3%/1.7% for 2025/2026 despite the front-loaded export boost fading; so further easing is likely by year-end.
• An accommodative policy stance addresses subdued inflation (-0.7% July) and negative credit growth while preserving financial stability.

Tuning Tariff Impact Estimates

• President Trump’s tariff policy seemingly follows a random walk with a drift towards deals. Path dependency raises risks and uncertainty around his volatile whims.
• Corporate avoidance measures have spared their customers from most of the pain, but Vietnam’s deal as a template could belatedly bring more of the pain to bear.
• We assume most countries stay at 10%. The impact of others rising to 20% may be smaller than the anti-avoidance hit, with the total now worth less than 0.4% to UK GDP.

By Philip Rush

Thailand: Policy Rate Held At 1.75% (Consensus 1.75%) in Jun-25

• The Bank of Thailand maintained its policy rate at 1.75% by a 6-1 vote, in line with expectations, citing robust first-half growth but heightened risks from US trade policy and global uncertainties.
• Despite raising its 2025 growth forecast to 2.3%, the MPC flagged a likely economic slowdown in the second half of the year, subdued inflation well below target, and negative credit growth as key factors influencing future rate decisions.
• The Committee signalled a data-dependent approach, preserving limited policy space and indicating that further rate cuts would require a significant deterioration in growth or inflation outlook.