The Bank of Thailand (BOT) has brought its policy rate down to the forecasted terminal level of 1.00%, a back-to-back 25 basis points cut at its first Monetary Policy Committee (MPC) meeting of 2026.
This move, which came as a surprise to many market participants, including those at Morgan Stanley and JPMorgan, was aimed at supporting the recovery amid below-potential growth, persistent downside risks to inflation, and continued credit contraction. The decision ran counter to both consensus expectations and Morgan Stanley’s own forecast for no change.
Morgan Stanley acknowledged that the BOT’s terminal rate forecast of 1% has now been reached, albeit slightly earlier than anticipated. The investment bank stated that with the policy rate at this level, the threshold for additional monetary easing is now considerably higher. Consequently, Morgan Stanley has shifted its preference from receiving 5-year Thai Baht Non-Deliverable Thai Overnight Repurchase Rate (NDTHOR) to a 1s5s steepener.
Morgan Stanley views the current economic outlook as largely aligned with the BOT’s own assessments, noting that central bank guidance suggests the monetary easing cycle has come to an end. The firm flagged that only a significant deterioration in macroeconomic indicators, a negative turn in the fiscal impulse, or a material change in the BOT’s policy response would prompt reconsideration of further rate cuts.
Regarding currency strategy, Morgan Stanley remains neutral on the THB, pointing out that recent regulatory measures to address the currency’s elevated valuations could neutralize upward pressure from both equity inflows and subdued inflation.
Echoing similar sentiments, JPMorgan described the BOT’s rate cut as a surprise, particularly given the previous expectation for no policy change. The bank highlighted that most MPC members saw the move as necessary to keep financial conditions supportive, further ease household and business debt burdens, and anchor medium-term inflation expectations. JPMorgan expects that the upward revision for Thailand’s GDP growth forecast is likely in April.
Looking to future policy moves, both banks see the bar for additional rate cuts as significantly higher. JPMorgan, in particular, noted several factors from the BOT’s policy statement that suggest a likely pause: the BOT explicitly indicated its policy stance is “sufficiently accommodative,” removed language suggesting readiness for further action, and stressed the need to monitor potential imbalances from low interest rates.
The MPC also emphasized the importance of preserving policy space in light of structural factors that cannot be resolved through monetary policy alone.
Underpinning these calls, JPMorgan forecasts that the BOT will keep its policy rate anchored at 1.00% throughout the remainder of 2026 and into 2027, to maintain flexibility amid growing uncertainties.
