Thailand Interest Rate

The Bank of Thailand kept its benchmark interest rate unchanged at 1% at its April 2026 meeting, as expected, leaving borrowing costs at their lowest level since 2022. The Committee assessed that the current policy rate remains appropriate to support economic recovery amid heightened uncertainty, while noting that the rise in inflation has been driven mainly by supply-side factors. Thailand’s economic growth is projected to moderate to 1.5% in 2026 and 2.0% in 2027, as the conflict in the Middle East weighs on activity by raising business costs and eroding household purchasing power. Meanwhile, inflation is forecast to average 2.9% in 2026, accelerating from -0.5% in the first quarter of this year, primarily due to higher global energy prices and cost pass-through effects. Inflation is then expected to ease to 1.5% in 2027 as supply constraints gradually diminish. The Committee said it will continue to monitor the impact of the war and other factors on future inflation risks.

The February meeting minutes from the Bank of Thailand revealed that most members favored a rate cut to keep financial conditions supportive of recovery, ease debt burdens for SMEs and households, and anchor medium-term inflation expectations amid rising downside risks. Two members, however, argued the 1.25% policy rate remained appropriate, noting earlier cuts were still filtering through the economy. The committee also flagged further downside risks to headline inflation, which could return to the target range more slowly than previously expected due to falling energy prices and possible government measures, while demand-driven pressures remain limited as growth stays below potential. Although the economy expanded faster than anticipated, activity was uneven across sectors, constrained by structural challenges and intensifying competition. Credit continued to contract, SME loan quality deteriorated, and liquidity remained tight amid restricted access to financing and a stronger baht.

The Bank of Thailand cut its benchmark interest rate by 25 bps to 1% at its February 2026 meeting, defying market expectations of a hold. The Committee voted 4-2 in favor of the cut. This marked the second consecutive reduction and the lowest level since September 2022, as the central bank seeks to support economic recovery, ease debt burdens for SMEs and households, and anchor medium-term inflation expectations. While economic growth in Q4 of 2025 was stronger than previously estimated, activity is expected to remain below potential in 2026 and 2027 and uneven across sectors, reflecting structural constraints and intensifying competition. In addition, downside risks to inflation are expected to increase compared with earlier assessments due to falling energy prices, possible additional government measures, and subdued demand. Inflation is now projected to return to the target range later than previously assessed, shifting from the first half of 2027 to the second half.