Bank of Thailand Leaves Policy Rate Unchanged

The Bank of Thailand left its benchmark interest rate unchanged at 1% at its August 2026 meeting, with the decision made unanimously as the central bank maintained an accommodative stance to support the recovery. The Thai economy is projected to expand broadly in line with previous assessments in 2026 and 2027, supported by stronger-than-expected merchandise exports and private investment linked to the technology and AI cycle. However, growth remains low and uneven, while private consumption was weaker as households remained cautious amid rising living costs. Meanwhile, headline inflation is projected to be lower than assessed, mainly due to lower energy prices, but is expected to rise through the first quarter of 2027 due to El Niño and gradual cost pass-through. Inflation is then expected to return to low levels amid weak domestic demand and below-potential growth.

Thailand’s economy received near-term support from accommodative monetary policy and government stimulus, according to minutes of the Bank of Thailand’s June meeting. Policymakers, however, emphasized that lasting growth hinges on deeper structural reforms to boost competitiveness. Some board members warned that prolonged easing could erode fiscal and monetary space, weigh on the country’s credit rating, and heighten financial vulnerabilities in a low-rate environment. Economic growth was projected to outpace earlier forecasts, though recovery remained uneven: exports and investment drove activity, while consumption was constrained by slower income gains and rising living costs. Inflation was seen edging higher on supply-side pressures, but officials noted limited risk of second-round effects, with medium-term expectations anchored within target.

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.