Bank of Thailand leaves interest rate unchanged

Policy makers see economic growth improving but inflation risk persists

The Bank of Thailand on Wednesday left its benchmark interest rate unchanged at 1.00% as widely expected, saying it would continue to monitor inflation trends and expectations.

The vote of the seven-member Monetary Policy Committee (MPC) was unanimous, said Don Nakornthap, the committee secretary.

The Thai economy is projected to expand at a faster rate than previously estimated, but the growth rate is low and uneven, the MPC said in a statement.

Inflation is expected to rise due to supply-side factors, but is projected to decline as those factors gradually ease, it said.

The Consumer Price Index in May rose by 2.8% from a year earlier, down slightly from 2.9% in April, as impacts from high energy prices and the Middle East war persisted.

Overall credit growth remains low, with attention needed to the credit quality of small business loans and vulnerable households. The MPC believes that accommodative monetary policy coupled with targeted monetary measures is helping to support the economic recovery.

All 28 economists ‌in a Reuters poll had expected the central bank to hold the policy ⁠rate steady. Of those surveyed, 23 of 27 predicted the rate would remain unchanged throughout 2026, while three forecast at ​least one 25-basis-point hike by the year-end, and one ​expected ‌a rate cut.

Six cuts between October 2024 and ​February ⁠had reduced the key rate by a total ⁠of 150 basis points as policymakers sought to spark the economy, ⁠which has been grappling ​with sluggish domestic demand and high household debt.

The MPC now forecasts the Thai economy to grow by 2.3% this year, easing to 1.8% in 2027. Growth is driven by better-than-expected exports and investment driven by technology and artificial intelligence cycles.

The impact of the Middle East war on manufacturing and tourism has been less than initially estimated, with large businesses adapting better than anticipated, the MPC said.

However, overall economic growth remains low and uneven. Small businesses have limited adaptability and face intense competition, while most households are pressured by slowing incomes and rising living costs, which will hinder private consumption after government incentives end.

The central bank projects headline inflation to remain close to previous estimates, averaging 2.8% this year and 1.4% next year.

The Thai baht, meanwhile, has weakened due to the strengthening of the US dollar, in line with market expetations that the Federal Reserve will lift interest rates later this year, the MPC said.