THAILAND: VIEW: JP Morgan Expects Three More 25bp BoT Cuts With Rates At 1%

The Bank of Thailand left rates at 1.75% with a 6-1 vote in line with expectations. JP Morgan had forecast a 25bp cut. It continues to expect a terminal rate of 1% with 25bp of easing in August and then again in Q4 2025 and Q1 2026. It sees the risks around August as “balanced” as the weakening domestic economy could be offset by a “better tariff decision ((i.e., 18% or less on Thailand)”. 

• JP Morgan thinks that “the leadership transition in October could usher in a more dovish central bank that could deliver three rate cuts through 1Q26”.
• “Previous rate cuts only provided “some cushion” against prevailing risks, while the BoT also “stands ready to adjust monetary policy going forward” as the economic outlook remains “highly uncertain”. Such rhetoric suggests that the easing cycle still has legs to run.”
• The June decision to hold “was primarily motivated by the central bank’s intention to preserve policy space amidst elevated US trade policy uncertainty” and JP Morgan now knows “that US trade policy was the marginal driver of the June rate decision, and that the BoT is adopting a wait-and-see attitude with tariff changes”.
• “The BoT upgraded its 2025 GDP forecast from 2.0% (from “reference scenario” of the April MPC) to 2.3% (JPM: 1.8%) while it downgraded the 2026 GDP estimate marginally from 1.8% to 1.7% (JPM: 1.0%).”
• “As the impact of US tariffs filters through, the central bank expects exports and domestic demand to weaken in 2H25.”
• “We estimate that the direct impact (i.e., on the trade balance) of an 18% tariff alone poses a 0.6%pt. drag on growth. Adding also the “payback” from front-loading (another 0.4%pt.), the cumulative impact on GDP is at least 1.0%pt, which would bring down annualized growth from the trend-like pace of 2.5% to 1.5%.”