Bangkok: The Monetary Policy Committee (MPC) has voted unanimously, 6-0, to keep the policy interest rate steady at 1.00 percent per year. The committee has projected a slowdown in economic growth to 1.5 percent and 2.0 percent in 2026 and 2027, respectively, and emphasized the need for vigilant monitoring of inflation developments.
According to Thai News Agency, Mr. Don Nakornthap, Secretary of the Monetary Policy Committee, announced the decision during the MPC meeting held on April 29, 2026. He stated that maintaining the current interest rate is crucial to support the slowing economy amid high levels of uncertainty, particularly due to the ongoing conflict in the Middle East.
The Thai economy is facing challenges due to the conflict, which is directly impacting businesses by increasing costs and undermining household purchasing power. Inflation is anticipated to rise in 2026 but is expected to decline in 2027 as supply-side pressures gradually ease. Credit levels are projected to remain low. The committee believes that the current interest rate is appropriate in the context of a slowing economy and rising inflation driven by supply factors.
Mr. Don further explained that pre-war economic data from the Middle East showed higher-than-expected growth, driven by domestic demand and exports. However, the war's impact is expected to slow economic growth to 1.5% and 2.0% in 2026 and 2027, respectively. Private consumption is under pressure from higher living costs and declining income trends, compounded by a decrease in foreign tourists due to rising costs and travel restrictions. Despite this, exports are projected to grow due to global demand for technology products.
The committee also discussed potential fiscal stimulus measures, such as a 300 billion baht package, which could boost GDP growth in 2026 by an additional 0.5-0.7%, resulting in higher growth than previously estimated. Nonetheless, this growth is likely to slow in the following year as the effects of the measures diminish. The committee continues to monitor risks from a potentially prolonged war and supply chain disruptions that could severely impact production and employment.
Headline inflation is projected to average 2.9% in 2026, primarily driven by rising global energy prices and cost pass-through, before declining to an average of 1.5% in 2027. Core inflation rates for 2026 and 2027 are projected at 1.6% and 1.5%, respectively. The committee noted that inflation risks are associated with rising energy prices and potentially prolonged raw material shortages due to geopolitical tensions.
Asset prices and exchange rates have fluctuated due to the uncertainty in the Middle East. Thai bond yields have risen in line with global markets, and the baht has weakened due to Thailand's high dependence on energy imports. Although interest rates in the financial system decreased following the policy rate decision, lending remains low as financial institutions exercise caution with high-risk borrowers.
The MPC's monetary policy framework aims to maintain price stability while ensuring sustainable economic growth and financial system stability. The committee believes that the current interest rate is appropriate to support economic recovery, with close monitoring of the impact of geopolitical tensions and other factors on future inflation risks.