Summary of the Monetary Policy Committee (MPC) meeting Results:
Here’s a breakdown of the key takeaways from the MPC meeting announcement:
1. policy Rate Decision:
* Majority Vote: 5-2 to maintain the policy interest rate at 1.50% per year.
* Dissenting Vote: 2 members voted to reduce the rate to 1.25%.
2. Economic Outlook (2025-2026):
* Growth: Expected to be 2.2% in 2025 and 1.6% in 2026. Growth is expected to slow in the second half of 2025 and 2026 due to US tariffs.
* Exports: Beginning to be negatively impacted by US tariffs,but initially boosted by demand to the US.
* Tourism: Expected to slow then gradually recover.
* Domestic Demand: Expected to slow down.
* Loans: Continuing to shrink, with deteriorating quality for vulnerable groups.
* Government Stimulus: Private consumption is receiving some support from government economic stimulus measures.
3. Inflation:
* General Inflation: Forecasted to decline to 0.0% in 2025 and 0.5% in 2026, then return to the target range in early 2027.Driven by lower energy prices, food prices, and retail oil price reductions.
* Core Inflation: Stable at 0.9% in both 2025 and 2026.
* Deflation Risk: Considered low, but the Committee will continue to monitor price developments.
4. Key Concerns & Considerations:
* US Tariffs: The impact of US tariff measures is a major concern and will be closely monitored.
* SME & Vulnerable Households: These groups are facing credit access issues, high debt, and economic uncertainty. The Committee wants to support them.
* Limited Policy Space: The majority of the committee believes there’s limited room for further monetary easing.
* Credit Expansion: Despite rate cuts, loan growth is stagnant due to decreased demand from large businesses and caution from lenders.
* Baht Appreciation: The strengthening of the Baht is impacting export businesses.
5. MPC Rationale:
* Majority View: maintaining the current rate allows the recent rate reduction to work its way through the economy. Thay prioritize the timing and effectiveness of monetary policy given limited options.
* Dissenting View: Further easing could support economic recovery and alleviate liquidity/debt problems, particularly for SMEs and vulnerable households.
6. future Monitoring:
The Committee will continue to monitor:
* The impact of US tariffs.
* Government budget spending.
* SME adjustments to competition.
* Access to credit and financial costs.
* Price developments to assess deflation risk.
* Credit expansion.
* The value of the Baht.
In essence, the MPC is taking a cautious approach, holding rates steady while acknowledging economic headwinds and the need to support vulnerable sectors. They are prioritizing observation and allowing existing measures to take effect before considering further easing.
