Thai auto industry expects impact of Fed rate cut to be visible in 2-3 months

The Federation of Thai Industries (FTI)’s Automotive Industry Club believes that the US Federal Reserve’s reduction of its key interest rate by an unusually large half a percentage point would start impacting the Thai auto industry in the next 2-3 months.

The Fed on Wednesday cut the interest rate by 50 basis points for the first time in four years to roughly 4.8%, in a move to bolster the job market and boost domestic investment.

“The impact of the Fed’s rate cut on the Thai auto industry will not be visible right away,” Surapong Paisitpattanapong, spokesman of the FTI’s auto club, said on Friday. “We may have to wait 2-3 months, but the FTI would monitor the situation closely.”

Surapong said he believed the Fed aimed to stimulate domestic investment, particularly new investments, by reducing financial costs. The move would initially help improve the US economy, and could also positively affect Thailand’s export market in the future, he added.

Surapong added that the Bank of Thailand might not follow the Fed in reducing the interest rate, which has been maintained at 2.5% for several months.

"In the current auto market, leasing companies are still using tight criteria in granting loans to curb NPLs [non-performing loans], resulting in low auto sales despite high demand,” he said.

“However, we expect that the disbursement of the fiscal 2025 budget from next month will help stimulate domestic spending and inject money into the system. Additionally, urgent policies such as debt restructuring, economic stimulus measures, and attracting foreign investors will all contribute to improving the economy for the remainder of this year,” said the spokesman.

Surapong added that the planned increase in minimum wage nationwide to 400 baht per day next month would have only a minor impact on large auto manufacturers, but could affect small and medium enterprises who make auto parts.