Thailand Holds Rates at 1%, Says Policy Fully Accommodative

Thailand's central bank has signalled that its current monetary policy stance is fully supportive of the economy, dismissing the need for an immediate reduction in interest rates. Bank of Thailand Governor Vitai Ratanakorn stated on Thursday that the existing policy rate of 1.00% is suitable for the present conditions and adequately supports economic activity.

While acknowledging there is theoretical space for a further 0.5 percentage point cut, the governor cautioned that maintaining ultra-low rates for an extended period could adversely affect savers. He indicated that alternative policy instruments remain available should additional economic support become necessary.

Addressing the broader economic landscape, Vitai noted that Thailand faces structural problems that cannot be resolved through monetary measures alone. He pointed to the nation's high household debt as a limiting factor, explaining that monetary policy has limited capacity to stimulate demand under such conditions.

The governor attributed the current economic weakness to lingering scars from past shocks, which have grown more frequent. With the country's potential growth rate estimated at 2.7%, he emphasised that efforts should concentrate on elevating actual growth closer to that benchmark. The central bank maintains its forecast for 2.3% economic expansion this year, following 2.4% growth in the previous year, which lagged regional peers.

In a separate regulatory development, Vitai announced plans for a comprehensive overhaul of non-bank regulations. This includes introducing a new licensing framework for buy now, pay later (BNPL) services, with public consultation expected by year-end. Under the proposed rules, BNPL services would be classified as personal loans, with borrower age limits set between 18 and 20 years, credit caps at 20,000 baht (approximately $606), and interest rates ranging from 15% to 20%.