Bank of Thailand holds policy rate at 1.00% on October 28

The Bank of Thailand’s Monetary Policy Committee (MPC) held the policy rate at 1.00% per annum on October 28, 2026, maintaining support for an uneven economic recovery while watching inflation risks from oil prices and El Niño.

MPC secretary Don Nakornthab said the vote was unanimous among members attending the meeting, with one committee member absent.

The MPC judged the current rate appropriate, saying accommodative monetary policy and targeted financial measures were helping the recovery. Inflation was expected to rise temporarily because of supply-side factors. The committee had also held the rate at 1.00% at its August 26 meeting. 

Technology lifts growth but gains remain concentrated

The MPC forecasts economic growth of 2.4% in 2026 and 2.1% in 2027, supported by stronger-than-expected exports and investment linked to the technology and artificial intelligence (AI) cycle.

Technology- and AI-related gains remain largely confined to businesses and workers in associated industrial and service sectors, the MPC said. Overall economic growth remains below potential.

Private consumption continues to face pressure from high household debt, a fragile labour market and weak purchasing power. Low-income households are particularly exposed to cost-of-living pressures.

The MPC also expects foreign tourist arrivals to decline because of higher oil prices, while small and medium-sized enterprises (SMEs) continue to face difficulties adapting and intense competition.

Oil prices and El Niño point to a temporary inflation rise

The MPC projects headline inflation averaging 2.1% in 2026 and 1.3% in 2027. Higher energy prices and the effects of El Niño are expected to push inflation up during the remainder of 2026 and into early 2027.

Headline inflation is then expected to return to low levels because of base effects and weak domestic demand. The MPC linked subdued demand to slow economic growth, partly reflecting structural problems.

Core inflation is forecast to average 1.2% in 2026 and 1.3% in 2027, while medium-term inflation expectations remain anchored within the target range.

The MPC warned that inflation could exceed its forecasts because of uncertainty surrounding the war in the Middle East, constraints on measures to cushion energy prices and businesses passing on higher costs. The MPC will monitor how cost increases feed through to core inflation, alongside medium-term inflation expectations.

SME credit shrinks as large-business borrowing expands

The MPC said overall credit was growing, driven mainly by loans to large businesses, while SME lending continued to contract across almost all sectors.

Large-business borrowing was primarily for working capital to strengthen liquidity and meet higher costs. Some of the credit expansion also supported a new wave of investment.

Thai financial institutions remained cautious about lending to higher-risk borrowers. Overall loan quality was stable, but the MPC said the repayment capacity of SMEs and vulnerable households needed continued monitoring.

Baht weakens on US policy expectations and higher oil prices

The MPC said the baht had depreciated against the US dollar as markets shifted towards expectations of tighter US monetary policy. Continued oil-price increases, driven by concerns over the Middle East, also weighed on the currency.

Thai government bond yields rose moderately in line with global financial markets. However, borrowing costs through loans, the private sector’s main funding channel, remained stable in line with the policy rate.

The MPC will continue monitoring the inflation outlook and risks, as well as the long-term effects of low interest rates on economic and financial stability. Its policy framework seeks to preserve price stability, support sustainable growth and safeguard the financial system.