Unanimous Decision: Monetary Policy Committee Holds Interest Rate at 1% as Inflation Expected to Exceed 3% Target, Economic Growth Forecast at 1.5%
Thailand's central bank held interest rates steady at 1% amid inflation expected to exceed its 3% target, with economic growth forecast at just 1.5% this year as Middle East conflicts weigh on business costs and consumer spending.
The Monetary Policy Committee voted unanimously 6-0 to maintain the policy interest rate at 1% per year, monitoring inflation expected to breach the 3% target. Economic growth is forecast at 1.5% this year.
Don Nakorntharp, secretary of the Monetary Policy Committee (MPC), announced that the committee meeting on April 29, 2026 reached a unanimous 6-0 decision to keep the policy interest rate at 1.00% annually.
Thailand's economy is expected to experience slower expansion due to Middle East conflicts, which directly impact business costs and household purchasing power. While inflation is projected to rise in 2026, it is expected to decline in 2027 as supply-side pressures gradually ease.
The committee estimates general inflation for 2026 will average 2.9%, up from negative 0.5% in the first quarter, driven primarily by global energy prices and cost pass-through effects. Inflation is expected to exceed the 3.0% target ceiling for a period before declining to an average of 1.5% in 2027 as supply factors resolve.
Core inflation for 2026 is projected at 1.6% and 2.5% in 2027, reflecting higher cost pass-through to goods and prices. However, price increases will not be widespread or sustained due to weak demand limiting businesses' ability to pass along costs. Medium-term inflation expectations remain anchored within the target framework.
"Pre-conflict economic data showed stronger expansion than previously estimated from both domestic demand and exports," Nakorntharp said. "However, the Middle East conflict has caused 2026 growth projections to slow to 1.5%, with 2027 expected at 2.0%."
Private consumption is under pressure from higher living costs, declining income trends, and reduced foreign tourist arrivals due to increased travel costs and restrictions. Despite these headwinds, merchandise exports continue to show solid growth driven by global demand for technology products.
The committee voted to maintain the policy rate, though it will closely monitor escalating inflation risks from energy prices and potential commodity shortages that may persist longer than expected due to Strait of Hormuz tensions, unexpectedly high business price pass-through, and potentially rising medium-term inflation expectations.
Economic conditions remain highly uncertain, requiring close monitoring of prolonged conflict risks and supply chain disruptions that could severely impact manufacturing and employment. However, should the government implement additional fiscal stimulus measures, the economy could expand faster than currently forecast, though growth would decline next year as stimulus effects fade and base effects diminish.
