Thailand Cuts Interest Rate by 25 bps as Expected

The Bank of Thailand left its benchmark interest rate unchanged at 1% at its June 2026 meeting, in line with market expectations and keeping borrowing costs at their lowest level since 2022. The Thai economy is now forecast to grow 2.3% in 2026 and 1.8% in 2027, with growth proving stronger than previously anticipated. The outlook is supported by robust merchandise exports, private investment linked to the technology and AI cycle, government measures aimed at cushioning the impact of the energy crisis, and improving conditions surrounding the Middle East conflict. Meanwhile, the central bank maintained its inflation outlook, projecting headline inflation to average 2.8% in 2026 and 1.4% in 2027. While recent price pressures have been driven by supply-side factors, officials expect inflation to moderate as these pressures gradually ease. The Committee also said it will continue to closely monitor the inflation outlook and related risks.

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.