Thailand’s central bank holds key rate, forecasts slower growth and higher inflation amid Iran war
BANGKOK — Thailand’s central bank kept its key interest rate unchanged at a review on Wednesday, as expected, saying it needed to assess the impact of higher oil prices driven by the war in the Middle East while also supporting an economy grappling with weak consumption and high household debt.
The Bank of Thailand’s (BoT) monetary policy committee voted unanimously to maintain the one-day repurchase rate at 1%, the lowest level in more than three years. It had cut the rate atits previous meeting in February.
“Thailand’s economic expansion is projected to moderate, as the war in the Middle East has a direct impact on growth by increasing business costs and eroding household purchasing power,” the central bank said in a statement after the meeting.
“Inflation is set to accelerate through 2026, and is expected to moderate in 2027 as supply-side pressures subside.”
The BoT said it expected economic growth of 1.5% this year, down from a projection of 1.9% made in February, and 2% in 2027. Last year’s growth of 2.4% lagged regional peers.
Headline inflation was forecast to average 2.9% this year, up from a projection of 0.3% made in December, driven by the surge in global energy prices. The central bank’s target range is 1% to 3%.
The central bank said it expected exports to rise by 8.1% this year, supported by demand for tech products, up sharply from a December projection of a 0.6% rise after a strong performance in the first quarter.
On Tuesday, the finance ministry lowered its 2026 growth forecast to 1.6% from 2%, and forecast inflation would rise to 3% this year.
NEED TO MONITOR DOWNSIDE RISKS
All 28 economists in a Reuters poll expected steady policy at this week’s meeting. A strong majority, 24 of 28, expected the policy rate to remain on hold throughout 2026, while four tipped a 25-basis-point (bp) cut by yearend.
Six cuts between October 2024 and February had reduced the key rate by a total of 150 bps as authorities sought to spark Southeast Asia’s second-largest economy. The Middle East war and oil price shock have added to the pressures facing the economy.
“It is necessary to monitor downside risks arising from a prolonged war and supply disruptions, which could have significant adverse effects on the manufacturing sector and employment,” the BoT said.
Earlier this month, the government approved support measures to mitigate the impact of high oil prices, including subsidies and loans. It plans to launch a consumer subsidy scheme in June.
The government has said it will borrow up to 500 billion baht ($15.4 billion) by October to support the economy, and will maintain the current value-added tax rate of 7% for another year.
The central bank’s next rate meeting is on June 24. — Reuters
