Bank of Thailand Surprises Markets with Interest Rate Cut to 1%

The Bank of Thailand made a decision that surprised markets by cutting its interest rate, starting the year with a move towards monetary policy easing. During the first monetary policy committee meeting of the year, held on February 25, 2026, the key policy rate – the one-day repurchase rate – was lowered by 25 basis points to 1.00%. The decision was passed by a 4:2 vote, with two committee members voting to keep rates unchanged. As all sources emphasize, this move was unexpected by the vast majority of observers. In a Reuters poll, only 6 out of 27 economists forecast a cut, Bloomberg noted just 3 out of 23, and The Wall Street Journal – 3 out of 12. The rest expected no change. In an official statement, the central bank justified its decision by the need to support an economy that "is expected to remain below potential in 2026 and 2027" and to be "unevenly distributed across sectors." It pointed to structural obstacles, intensifying competition, and uncertainty related to U.S. tariffs. Articles also highlight the impact of the strong baht, which had been appreciating against the dollar since the start of the year, putting pressure on Thai exports. The Bloomberg agency cites analysts who see the currency's strength as one of the key factors behind the decision. In response to the announcement, the baht weakened slightly, giving up earlier gains, while the main stock market index, the SET, recorded a significant increase, ranging according to various sources from 1.8% to 2.2%. The Thai economy, one of the leading economies in Southeast Asia, has for decades relied on exports, tourism, and foreign direct investment. After a period of rapid growth at the end of the 20th century, often referred to as an "Asian tiger," it has in recent years been grappling with structural challenges, including high household debt and the need to transition to a higher level of technological development. The central bank's decision fits into the broader context of economic challenges, which Governor Vitai Ratanakorn spoke about the day before. During a business seminar, he indicated that macroeconomic stability is solid, but the growth rate – currently estimated at about 1.9% – is still too low. His ambition is to achieve growth of around 2.7% in 2026, which will require – as he emphasized – coordinated action from fiscal and monetary policy as well as additional investment. Articles also mention other problems: high household debt, weak consumption, and the slow recovery of the tourism sector post-pandemic. The rate cut is the second in a row, indicating a continuation of the monetary policy easing cycle in the face of these difficulties.