BANGKOK, Thailand – The Siam Commercial Bank Economic Intelligence Center (SCB EIC) expects Thailand’s policy interest rate to remain at 1% through 2027, citing weak economic growth, subdued inflationary pressure and continued financial vulnerability among households and small and medium-sized businesses.
The assessment follows the Bank of Thailand’s Monetary Policy Committee (MPC) unanimous decision on August 26 to keep the policy rate unchanged at 1%, which the central bank considers an accommodative level appropriate for supporting an economy that remains weak and uneven.
SCB EIC said it expects the MPC to maintain the 1% rate throughout the remainder of 2026 and into 2027. It forecasts Thailand’s economy to grow only about 2.1% next year, while headline inflation is expected to gradually ease as supply-side pressures fade.
With inflationary risks limited and economic growth remaining fragile, SCB EIC said maintaining sufficiently accommodative monetary policy, together with targeted financial measures, would be more appropriate than further rate increases.
The research centre noted that lower interest rates alone may not resolve the financial difficulties faced by vulnerable households and SMEs. These groups continue to face tight financial conditions and higher credit risks, making targeted financial measures a more effective way to address their problems.
SCB EIC also sees less need for the MPC to raise interest rates, particularly as inflationary pressures are expected to remain manageable. Although differences between Thai and US interest rates could put pressure on the baht at certain times, the Bank of Thailand still has room to manage excessive currency volatility, supported by the country’s substantial foreign-exchange reserves.
The centre also pointed out that Thailand’s real policy interest rate is not the lowest in the region. After adjusting the policy rate for headline inflation, Thailand’s real rate remains higher than those of several neighbouring countries, particularly economies facing higher inflation.
The MPC’s latest decision marked its third consecutive meeting at which the policy rate was held at 1%. The central bank said economic growth remains low and uneven, with households and SMEs still vulnerable, while headline inflation has been lower than expected. Inflation is nevertheless expected to rise gradually during the remainder of the year as supply-side factors ease.
The MPC said the current interest rate remains appropriate and that another rate cut could carry costs that outweigh its benefits under current conditions. Instead, fiscal measures and targeted financial assistance are needed to cushion the impact of the situation in the Middle East and ease financial pressure on vulnerable households and SMEs.
The committee has also encouraged financial institutions to provide greater assistance to vulnerable borrowers and viable SMEs through targeted financial measures. Looking ahead, the MPC will continue monitoring developments in the Middle East conflict, international trade barriers and inflation risks as it assesses the appropriate direction of monetary policy.
