The Bank of Thailand will likely keep borrowing costs at their lowest in nearly four years to shield the fragile economy from the impact of the global oil shock.
The Ministry of Finance lowered its 2026 economic growth forecast to 1.6% from 2% previously, and the inflation estimate was raised significantly from 0.3% to the top end of the central bank’s 1% to 3% target.
The Monetary Policy Committee will hold the one-day repurchase rate at 1% on Wednesday, according to all 24 economists in a Bloomberg News survey. That’s the first consensus on the Thai key rate among analysts in two years, following strong guidance from the central bank.
Governor Vitai Ratanakorn said earlier this month that the policy rate would be maintained at its current level “for as long as possible” to support the economy.
As a net oil importer, Thailand remains vulnerable to swings in global crude prices, which could weigh on economic activity while pushing up costs.
Finance Minister Ekniti Nitithanprapas added that the government is working on a cash handout to boost consumption and support the broader economy.
Kasikorn Research Center economist Nattaporn Triratanasirikul said staying on hold may be the best option for now amid signs of building inflation, expecting a pause through year-end.
The Bank of Thailand is also set to update its economic forecasts incorporating the impact of higher oil prices, following the finance ministry’s estimates.
Inflation, which has been negative for about a year due to weak demand, is expected to turn positive this quarter as fuel subsidies are scaled back.
Pantheon Macroeconomics chief emerging Asia economist Miguel Chanco said rising inflation may reduce room for further easing for the rest of the year.
Markets expect the central bank to shift toward a more neutral stance as uncertainty persists over the long-term impact of the energy shock.
The Thai baht has weakened more than 4% since the start of the Iran war, making it one of the worst-performing emerging market currencies, reflecting Thailand’s reliance on oil imports.
The finance ministry expects the baht to average 32 per dollar in 2026 compared to 31.78 so far this year.
BNY strategist Wee Khoon Chong said further baht weakening could be positive for domestic growth.
Bloomberg
