Global & Thai Economy
Escalating trade wars and political tensions weigh on global economy. In Thailand, risks to economic growth expected to support policy rate cuts.
US
U.S. economic uncertainty rises as Trump threaten 100% tariff on Chinese goods and government shutdown drags on. The preliminary consumer sentiment index dropped to a five-month low of 55.0 in October, while one-year inflation expectations edged down slightly to 4.6% in September from 4.7% in August.
President Donald Trump on October 10 announced plans to implement the new 100% import tariff and broad export controls on key software effective November 1. However, U.S. treasury secretary Scott Bessent revealed that the two leaders are still scheduled to meet on the sidelines of the APEC Summit between October 31 and November 1, and that the tariff hike may be avoided if progress is made in the talks. Meanwhile, the prolonged government shutdown could weigh on economic growth in the period ahead. Considering these risks—along with weakening employment and confidence—the Fed is expected to cut interest rates twice more (by 25bps each) during the remaining meetings of this year.
Eurozone
Eurozone economy lacks key growth drivers, while France remains under political pressure. The manufacturing PMI fell back into contraction at 49.8 in September, down from 50.7 in August, although the services PMI still expanded and rose to an eight-month high of 51.3. Meanwhile, retail sales growth slowed to a one-year low of just 1.3% YoY in August.
Economic growth remains subdued, weighed down by sluggish consumption, slowing wage growth, and low consumer confidence. Looking ahead, manufacturing and exports are likely to face additional pressure from the U.S. tariff hikes. Moreover, Germany’s fiscal stimulus plan continues to face delays in budget approval, while France’s political risks remain following President Macron’s reappointment of Sébastien Lecornu as Prime Minister amid pressure to form a new cabinet and submit the 2026 budget bill. Given these developments with inflation concerns, Krungsri Research expects the ECB to slow the pace of interest rate cuts in order to preserve policy space for addressing future risks
Thailand
Thailand’s anemic outlook and persistent risks may prompt MPC to cut rates twice by 1H26. At the October 8 meeting, the MPC voted 5-2 to keep the policy rate at 1.50%. Most members give importance to the timing and effectiveness amid limited policy space. Meanwhile, two members voted for a rate cut.
The MPC’s decision to hold the policy rate this month reflects a “wait-and-see” stance, but in practice (considering the real interest rate) it could be interpreted “more restrictive”, given the BOT’s lower inflation projection (see table). Looking ahead, the Thai economy remains fragile and faces downside risks to growth, including ongoing credit contraction, higher real interest rates amid lower projected inflation (September inflation rate remained negative for the sixth consecutive month at –0.72% YoY), limited fiscal spending under a minority government, and weak exports amid higher U.S. tariffs. Thus, Krungsri Research expects two rate cuts to 1.00% by the first half of 2026 to shore up economic growth momentum, signal commitment to its inflation-targeting framework, and soften constraints on loan growth. Also, we view that the period by early 2026 could present the optimal window for easing, before downside risks further undermine private investment and overall economic sentiment.
