Thai central bank unexpectedly cuts rate, open to more easing amid tariffs uncertainty

By Orathai Sriring, Kitiphong Thaichareon and Chayut Setboonsarng

BANGKOK, Feb 25 (Reuters) - Thailand's central bank unexpectedly cut its policy interest rate on Wednesday, as it seeks to further support an economy pressured by U.S. tariff uncertainty and a strong baht THB=TH.

Policymakers kept the door open for more easing if Southeast Asia's second-largest economy performs worse than forecast, with some economists expecting a further cut this year.

The Bank of Thailand's monetary policy committee voted 4-2 to cut the one-day repurchase rate THCBIR=ECI by 25 basis points to 1.00%, the lowest level in more than three years, at its first review of the year.

Only six of 27 economists in a Reuters poll had forecast such a cut at the meeting, with the rest seeing no change.

The baht THB=TH pared gains after the announcement, but remains up about 1.2% against the U.S. dollar so far this year. Thailand's main stock market .SETI extended gains to be up 1.7% on the day.

"Economic growth is projected to remain below potential in 2026 and 2027 and uneven across sectors, reflecting structural impediments and intensified competition," the BOT said in a statement, expecting growth to slow to about 2.0% this year from last year's 2.4%

The Thai economy, which has lagged regional peers since the pandemic, has struggled with multiple challenges, including U.S. tariffs, high household debt and the baht's strength.

ECONOMY LAGS REGIONAL PEERS

"If the economic outlook changes significantly, we are ready to reduce rates," Assistant Governor Don Nakornthab told a news conference, calling Wednesday's reduction "front-loading" to support the economy.

Gareth Leather, senior Asia Economist at Capital Economics, said he expected "one further cut this year, taking the policy rate to 0.75% by year-end".

But Kasikornbank's Kobsidthi Silpachai said "unless Thailand is expected to see a recession, we think the 1% rate should be the floor in this cycle".

It was the sixth cut since October 2024, with the policy rate down by a total of 150 basis points as authorities try to revive the economy.

On Tuesday, BOT Governor Vitai Ratanakorn said fiscal and monetary policy should be deployed to lift growth toward potential at 2.7% this year.

BAHT STRENGTH PRESSURES EXPORTS

The baht's appreciation has tightened financial conditions for exporters, the central bank said.

The currency's gains this year add to a 9% rise against the dollar last year, threatening the competitiveness of the export and tourism sectors, which are both key economic drivers.

U.S. President Donald Trump set global tariffs at 15% after the Supreme Court struck down his tariff regime, below the 19% rate that was being levied on Thailand, but uncertainty remains.

"It is necessary to monitor uncertainties surrounding U.S. tariff measures, the 2027 budget delay, and the adjustment of SMEs, which continue to face challenges from heightened competition, limited access to credit, and the appreciation of the Thai baht," the central bank said.

Prime Minister Anutin Charnvirakul's Bhumjaithai party will lead a new coalition government, expected by April, after its strong performance in a general election earlier this month.

While a strong coalition government could offer relief to the economy, lifting growth remains a challenge. Finance Minister Ekniti Nitithanprapas said the incoming government would continue its economic policies.

The BOT's next interest rate meeting is on April 29.