Bank of Thailand may cut rates amid US tariff concerns
Analysts warn regional trade pressure could force central bank into aggressive rate-slashing strategy
The Bank of Thailand (BoT) may reduce interest rates multiple times by the end of this year to bolster the economy if US tariffs on Thai goods prove uncompetitive compared to regional counterparts.
Head of research for the banking and financial sector at Kasikorn Research Centre, Kanjana Chockpisansin, indicated that the think tank anticipates at least one additional rate cut from the central bank’s Monetary Policy Committee (MPC) this year.
“If the US imposes higher tariffs on Thai exports than on other regional economies, it could hinder Thailand’s economic outlook in the latter half of the year.”
Without competitive US tariffs, Thailand’s exports and private investment could suffer significantly, leading consumers to reduce spending. The government possesses a limited fiscal budget to drive economic growth.
The MPC has three further meetings scheduled this year in August, October, and December to deliberate on cutting the rate from 1.75%.
The baht fell to 32.68-32.70 against the US dollar yesterday, July 31, following the Federal Reserve’s decision on Wednesday, July 30, to maintain the US interest rate at 4.25-4.50% for the fifth consecutive meeting.
Federal Reserve Chair Jerome Powell commented that the central bank is not in a rush to reduce the rate as it assesses the impact of President Donald Trump’s tariff strategy on US inflation for the remainder of the year, reported Bangkok Post.
The Fed also has three meetings left this year.
“The possibility of a Fed rate change in September seems entirely off the table. October or December is more plausible for a rate cut,” said Kanjana.
Asia Plus Securities anticipates the MPC will lower the rate by 25 basis points as early as August due to concerns about economic slowdown when US tariffs are implemented.
“Fiscal measures have not been fully activated to boost the economy, and Thailand’s inflation decreased for the third consecutive month by 0.25% year-on-year.”
As the dollar strengthens post-Fed’s decision and the release of robust US economic data, K-Research anticipates the baht may weaken to 33.70 against the US dollar in the latter half of 2025.
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