BANGKOK (Feb 26): Thailand's central bank cut its key interest rate by a quarter percentage point on Wednesday, a move it said was a response to weaker economic growth and increased risks posed by global trade policy uncertainty.

The Bank of Thailand's monetary policy committee voted 6-1 to reduce the one-day repurchase rate by 25 basis points to 2.00% at its first meeting of 2025. That followed a rate hold in December and a quarter-point cut in October.

Ten of 26 economists in a Reuters poll had predicted the key rate would be cut this week, with 16 expecting no policy change on Wednesday.

The move follows repeated government calls for further easing to support the economy and weaken the baht to boost exports, a key growth engine.

The central bank said the rate cut was based on the economic outlook and took into account slower gross domestic product growth and trade policy uncertainty among major economies.

It said it was ready to adjust policy if the outlook changed, adding the cut was not part of an easing cycle and the bar would be high for further reductions.

"The Thai economy is projected to expand slower than anticipated, owing to structural impediments in manufacturing production as well as competition from imported goods, despite support from domestic demand and tourism," it said in a statement.

The vote to cut was to align with "financial conditions with the economic and inflation outlook as well as financial stability, and to better cope with increasing downside risks".

Thailand's benchmark stock index rose 1.75% after the decision, while the baht edged up 0.04%.

Southeast Asia's second-largest economy expanded 2.5% last year, less than expected and lagging peers.

The central bank Governor Sethaput Suthiwartnarueput last month told Reuters 2025 growth could be below 2.9% this year, while Finance Minister Pichai Chunhavajira expects growth of between 3% and 3.5%, driven by stimulus measures and strong foreign investment.

The central bank said the rate cut would not impact financial stability and inflation was expected to remain in its target range of 1% to 3%.

Annual headline inflation was 1.32% in January, after averaging 0.4% last year.

Pichai had on Monday said Thailand's low inflation meant there was room for an interest rate cut to boost economic growth and help weaken the baht to support exports.

Capital Economics senior economist Gary Leather said downside risks to Thailand's growth forecasts had increased but the central bank's easing cycle would be gradual.

"The weakness in the economy is putting downward pressure on inflation.... However, a period of entrenched deflation is a risk, and we think more monetary policy support will be required," he said in a client note, which forecast the key rate would end next year at 1.50%.

Uploaded by Chng Shear Lane