Kiatnakin Phatra Securities (KKPS) expects the Bank of Thailand’s Monetary Policy Committee (MPC) to keep the policy rate unchanged at 1.00% throughout 2026 and 2027, citing limited need for a rate hike amid tight financial conditions and weak domestic demand.
The MPC unanimously voted to maintain the policy rate at 1.00% on Wednesday, in line with KKPS and market expectations. The committee noted that Thailand’s overall growth trajectory remains broadly consistent with the full-year forecast, while acknowledging downside risks to inflation and a fragile recovery among vulnerable groups.
KKPS highlighted that the MPC placed emphasis on the K-shaped nature of the Thai economy. GDP growth is expected to remain broadly stable, supported by strong exports and higher private investment linked to the global AI cycle. However, private consumption continues to face pressure from the rising cost of living.
The brokerage also noted that the benefits from technology-related investment remain concentrated and carry significant import content, which limits broader spillover effects across the economy.
On inflation, KKPS said headline inflation has been lower than expected, but the MPC will continue to monitor supply-side developments and the pass-through to core inflation. The committee expects headline inflation to rise and peak in the first quarter of 2027 due to the base effect, before returning to low levels as weak domestic demand persists amid below-potential growth.
KKPS viewed overall financial conditions, particularly credit growth, as the key factor behind the MPC’s decision. Recent credit expansion has mainly come from working-capital loans to large corporations, while retail and SME loans remain in contraction as commercial banks maintain cautious lending standards. Concerns remain for the MPC about asset quality among vulnerable borrowers, reinforcing the need to maintain an accommodative policy stance.
Following these, the brokerage flagged two key risks to monitor: potential global rate hikes that could widen interest rate differentials and increase Thai baht depreciation risks, and stronger pass-through from energy and food prices into core inflation, which could keep inflation higher for longer.
