Thai central bank keeps key interest rate unchanged, as expected

[BANGKOK] Thailand’s central bank upgraded its economic growth forecasts on Wednesday (Jun 24), signalling a modest improvement in the outlook after it held interest rates steady for a second meeting.

The Bank of Thailand (BOT) said it expected economic growth to come in at 2.3 per cent this year, higher than a projection of 2 per cent made earlier this month, after the government announced planned extra borrowing of 400 billion baht (S$15.6 billion). It forecast growth of 1.5 per cent at its April policy review.

“Thailand’s economic expansion is projected to be stronger than previously assessed, but growth remains low and uneven,” the BOT said in a statement.

The central bank forecast 2027 growth at 1.8 per cent, versus 1.7 per cent projected in early June. The economy grew 2.4 per cent last year, lagging peers.

The BOT’s monetary policy committee voted unanimously to maintain the one-day repurchase rate at 1 per cent.

Six cuts between October 2024 and February had reduced the key rate by a total of 150 basis points (bps) as policymakers sought to spark momentum in South-east Asia’s second-largest economy, which has been grappling with sluggish domestic demand and high household debt.

The surge in global energy prices means inflation will remain high this year and moderate next year as supply-side pressures ease, the central bank said.

“We expect interest rates to remain unchanged for the rest of this year, with the BOT likely to resume its easing cycle next year if inflation falls back as we anticipate,” said Gareth Leather, senior Asia economist at Capital Economics.

Inflation is expected to rise above the target range later this year. Headline inflation is projected at 3.3 per cent in June and to peak at 4.5 per cent from October to December. Despite rising price pressures, overall credit growth remains subdued.

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The central bank said it expected exports to rise 14 per cent this year, versus a forecast of 12 per cent to 13 per cent growth made in early June.

Foreign tourist arrivals are forecast at 33 million this year, unchanged from the previous forecast, the BOT said.

Last month, the state planning agency maintained its 2026 economic growth forecast at 1.5 per cent to 2.5 per cent despite stronger-than-expected growth in the first quarter.

The central bank’s next interest rate meeting is on Aug 26.

The BOT said the baht’s weakness was mainly due to a stronger US dollar, and recently from capital outflows from the stock market.

“Despite improving developments surrounding the Middle East conflict, cost pass-through by firms warrants close monitoring amid elevated costs, as well as medium-term inflation expectations,” the BOT said.

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