BANGKOK — Thailand’s central bank has lowered its policy interest rate to 2.00%, marking the latest chapter in the country’s monetary policy evolution spanning multiple administrations.
The Monetary Policy Committee (MPC) voted 6-1 on February 26, 2025, to cut the rate by 0.25 percentage points from 2.25%, the first time in two years the rate has reached this level.
Sakkaphop Phanyanukul, secretary of the MPC of the Bank of Thailand (BoT), emphasized that the committee’s decision was based on Thailand’s economic growth falling short of expectations rather than political pressure.
“I confirm that this is not yet a downward interest rate cycle. The Monetary Policy Committee’s decision to reduce interest rates this time did not come from political pressure or the private sector, but because the assessment of the overall Thai economy shows a significant downward growth trend,” Sakkaphop stated.
Historical Context
According to Matichon report, the interest rate journey began during General Prayuth Chan-ocha’s administration following the 2014 military coup. Prior to the coup, interest rates stood at 2.0%, but by the end of 2019, they had been reduced to 1.25%.
When COVID-19 struck in early 2020, the Bank of Thailand made a swift decision on February 5, cutting rates to a historic low of 1.0% – the lowest since Thailand established a policy interest rate system. By May 20, 2020, rates dropped even further to 0.5%, where they remained for approximately two years.
The tide began to turn on August 10, 2022, when the central bank raised rates to 0.75%. As inflation became a global concern, Thailand followed other central banks worldwide, implementing eight consecutive rate hikes from 2022 into 2024 during Srettha Thavisin’s administration.
Political Leadership Transitions
Throughout his tenure as both Prime Minister and Finance Minister, Srettha repeatedly urged the central bank to reduce interest rates “for the sake of the people’s hardship” after his government had fully deployed fiscal measures. However, his appeals went unheeded until his removal from office in August 2024 following a Constitutional Court ruling, with interest rates standing at 2.50%.
When Paetongtarn Shinawatra assumed the role of Prime Minister, she employed Finance Minister Pichai Chunhavajira to conduct regular negotiations with central bank executives. In October 2024, the MPC reduced the policy rate to 2.25%, followed by the latest reduction to 2.00% in February 2025.
This most recent cut came after Prime Minister Paetongtarn delivered a speech at the “Trust Thailand” event organized by the Matichon Group, where she called for lower policy rates to help reduce costs for citizens. She highlighted Thailand’s low inflation rate while emphasizing the government’s efforts to stimulate the economy to achieve 3% GDP growth in 2025.
Economic Analysis
The MPC noted that despite strong domestic demand, tourism, and exports, the Thai economy grew less than expected due to high destocking. Economic growth is likely to fall short of expectations due to structural problems in the manufacturing sector and increased competition from imported goods, particularly in the automotive, petrochemical, and building materials industries. Meanwhile, the service sector continues to grow.
Domestic demand is expected to increase, driven by private consumption, while exports will grow, particularly in technology and processed agricultural products. However, the manufacturing sector needs close monitoring, especially SMEs struggling with competitiveness and the impact of major economies’ trade policies.
Inflation and Financial Conditions
Overall inflation is expected to remain stable near the lower limit of the target range, due to falling global crude oil prices and intense price competition from imported goods. This level of inflation is not a sign of deflation or a sustained negative trend but helps lower living costs and reduce business spending.
Financial conditions remain tense. While credit growth and quality show signs of stabilizing overall, lending to SMEs in structurally difficult sectors continues to decline. Consumer credit growth has also slowed as households recover from income losses and high debt burdens.
Forward Outlook
The MPC believes this rate cut will ease financial conditions without jeopardizing long-term stability. The Committee will continue monitoring credit growth and quality among vulnerable groups, as well as the impact on economic activity. The Thai baht remains volatile against the US dollar due to policy uncertainties in major economies.
The Committee recognizes that Thailand’s economic slowdown stems from structural factors requiring policy measures to enhance competitiveness and improve industrial capacity for long-term sustainability. Moving forward, they will closely monitor economic and financial developments while maintaining their framework aimed at price stability, sustainable economic growth, and financial system stability.
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