Thailand: BoT pause extended as stagflation risks build – DBS

DBS Group Research economist Chua Han Teng expects the Bank of Thailand (BoT) to keep its policy rate at 1.00% through end-2026 as stagflationary pressures from Iran-related supply shocks hit growth and inflation. DBS raises its 2026 inflation forecast to 2.5% and sees Gross Domestic Product (GDP) growth around 1.6%, broadly in line with BoT projections.

BOT seen on prolonged policy hold

"The Bank of Thailand (BOT) voted unanimously to keep its policy interest rate unchanged at a near four-year low of 1.00% at its April 29 meeting."

"We maintain our view that the BOT will remain in an extended pause through end-2026, as the economy faces stagflationary dynamics stemming from supply-driven inflation acceleration and weaker economic growth due to disruptions in Strait of Hormuz linked to the Middle East conflict."

"We expect annual average headline inflation in 2026 to return to the BOT’s 1-3% target range for the first time since 2023, and are raising our 2026 forecast to 2.5% (from 0.5%)."

"Our 2026 growth assessment and forecast of 1.6% is broadly aligned with the BOT’s projection of 1.5%."

"Overall, we expect the BOT to be cautious in adjusting interest rates in the coming months, unless growth steps down sharply or inflation pressures broadens in a manner that threatens medium-term inflation expectations."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)