BOT’s ‘skilful balancing act’ wins it ‘Central Bank of the Year’ award

The Bank of Thailand (BOT) has been honoured with the “Central Bank of the Year 2025” award by Central Banking Publications, a leading global authority on central banks. 

The accolade recognises the BOT’s exceptional stewardship of monetary policy, financial supervision and organisational management amid considerable economic uncertainty.

The organisers commended the BOT for its “skilful balancing act” in navigating global economic headwinds and domestic structural challenges. The bank’s ability to support economic growth while maintaining long-term price and financial stability was particularly highlighted.

Despite facing political pressures, the BOT has “safeguarded its independence” in making monetary policy decisions and implemented key reforms to modernise Thailand’s financial services sector.

The BOT has remained steadfast in its core mission: to preserve economic stability and prepare the financial system for the challenges of the future.

In late 2023, the BOT effectively normalised its monetary policy by raising the policy interest rate to 2.5%, marking the conclusion of the post-Covid-19 gradual adjustment strategy. This approach contrasted with the rapid interest rate hikes implemented by many other central banks.

In 2024, the BOT adjusted the interest rate back to its approximate neutral level of 2.25%. More recently, the BOT has reduced the policy interest rate by 0.25%, from 2.25% to 2%.
 

A crucial factor in the BOT’s strategy was its accurate assessment that Thailand’s rising inflation was primarily driven by temporary supply-side factors. This allowed the bank to focus more on supporting economic recovery.

While some expressed concerns about the BOT’s optimistic outlook regarding interest rate adjustments, Governor Sethaput Suthiwartnarueput, in an interview with Central Banking in early 2023, pointed out that the BOT had tightened monetary policy before Thailand’s GDP had recovered fully to pre-pandemic levels, ahead of many of its peers. 

He also emphasised the “low probability” of a wage-price spiral in Thailand, thus negating the need for more aggressive interest rate rises.

“That’s why we thought a gradual and measured approach to raising interest rates was reasonable, especially given the high level of household debt we are facing,” Sethaput said.
 

Experts believe this approach facilitated a smooth transition to a neutral policy rate without excessive increases, effectively curbing inflation while minimising the impact on economic recovery.

Inflation fell from its peak to pre-Covid-19 levels within just six months, without hindering economic recovery.

A distinctive aspect of the BOT’s policy approach is its coherent use of supplementary tools to better balance economic policies, particularly amidst high household debt. The BOT implemented targeted financial measures to maintain stability and address vulnerabilities.

For example, the BOT introduced “responsible and fair lending measures,” mandating debt restructuring for “at-risk” and “problematic” retail loans.

This ensured policy liquidity amidst high uncertainty and enhanced the BOT’s flexibility to adapt to various economic conditions.

This was accompanied by consistent and clear communication, focusing on future economic trends and minimising reliance on short-term data, allowing the BOT to look past short-term volatility and ensure its policies do not exacerbate financial market fluctuations.