Thailand: Bank of Thailand leaves rates unchanged in August
Interest rates left on hold, as expected: At its meeting on 26 August, the Bank of Thailand (BOT) decided to maintain its one-day repurchase rate at 1.00%, extending June’s pause and keeping the rate at its lowest level since Q3 2022. The decision was unanimous and in line with market expectations.
Bank sees lower inflation but continued weak and uneven growth: The BOT decided against a cut, as it expects inflation to rise temporarily during the remainder of 2026 and into early 2027, mainly due to supply-side factors. At the same time, the Bank refrained from a hike, as it noted that economic growth remained low and uneven, despite tailwinds from the global AI upcycle. It judged that an accommodative monetary policy stance, alongside targeted financial measures, would support the economic recovery.
Rates unlikely to change this year: At its August meeting, the BOT stated that the current policy rate was appropriate to support economic recovery, while noting that inflationary pressures could rise temporarily. The Committee also highlighted risks from developments in the Middle East and international trade barriers, as well as continued weakness in SME credit and vulnerable households.
The vast majority of our panelists continue to see the BOT’s policy rate ending 2026 at current levels. Although temporarily higher inflation and external risks leave little room for rate cuts in the near term, weak GDP growth should also limit the scope for rate hikes.
The BOT should reconvene on 28 October.
Panelist insight: Nomura analysts commented:
“We continue to expect the BOT to leave its policy rate unchanged at 1.00% for the rest of the year and throughout 2027. [Its] tone was still neutral and broadly unchanged from June, although we would argue the MPC is giving greater weight to weak and uneven growth than to the temporary rise in headline inflation. We continue to forecast 2026 GDP growth of 1.8%, well below our potential growth estimate of 2.4% and undershooting the BOT’s forecast of 2.3%. We assess inflation has likely already peaked owing to weak domestic demand, leaving no case for a hike, and see significant downside to the BOT’s current 2026 inflation forecast of 2.8%. We forecast headline inflation of 1.5%, near the lower end of the BOT’s target range of 1-3%.”