Thailand: Stable policy anchors short-end yields – DBS

DBS Group Research economist Chua Han Teng expects the Bank of Thailand (BoT) to keep its policy rate at 1.00% through 2026, following the unanimous decision on August 26 to stay on hold. Teng highlights low and uneven economic growth, constrained private consumption, and subdued inflation, implying stable short-end Thai government bond yields despite external currency volatility and ongoing supply-side inflation risks.

BoT seen holding at 1.00%

"We continue to expect the Bank of Thailand (BoT) to keep its policy rate stable at 1.00% through the remainder of 2026, resulting in ongoing stable short-end government bond yields."

"The central bank’s Monetary Policy Committee appears to have limited appetite to adjust interest rates in either direction."

"Lower-than-expected headline inflation, which has retreated from the upper end of the BoT’s 1-3% target range, has reduced the impetus for policy tightening, amid anchored medium-term inflation expectations."

"Nevertheless, the unresolved conflict in the Middle East, continued albeit gradual pass-through of energy costs, and upside risks to food inflation arising from adverse El Nino-related weather conditions will keep the authorities vigilant on inflation, even as they look through the supply-side shock that would ease after 1Q27."

"The BoT noted volatile movements in the Thai baht against the US dollar due to external developments."

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