Bank of Thailand holds rate at 1%, lifts 2026 GDP forecast to 2.4%

Key takeaways

• The Bank of Thailand's Monetary Policy Committee voted unanimously on Wednesday, October 28, 2026, to keep the policy rate at 1.00%, its fourth straight hold; one member was absent.
• The central bank raised its GDP forecast to 2.4% for 2026 (from 2.3% in June) and to 2.1% for 2027 (from 1.8%), but said growth "remains below potential" and the gains are concentrated in technology and AI-linked exports.
• Lending to small and medium-sized enterprises (SMEs) is still shrinking: SME loans fell 1.4% year on year in August while large-company loans grew 6%.
• Headline inflation is projected at 2.1% for 2026. With January–September averaging 1.54%, that forecast implies prices rising faster than the 3% top of the target band in the final quarter, by Bullquill's calculation.
• The next MPC meeting is on December 23. Commerzbank expects rates on hold through much of 2027; OCBC's house view is a cumulative 50 basis points of hikes in the first half of 2027.

Thailand's central bank left borrowing costs unchanged at 1.00% at its October 28 meeting while nudging up its growth outlook, according to the Bank of Thailand's MPC statement (press release No. 41/2026). For Thai borrowers, the baht and SET-listed banks, the message was mixed: a stronger export story, but a still-weak domestic economy.

The Bank of Thailand interest rate decision was widely expected. All 26 economists polled by Reuters had forecast no change, and most saw the rate staying at 1.00% through the end of 2027, Reuters reported in a story carried by AOL. The baht was largely unchanged after the announcement.

Bank of Thailand interest rate: what the MPC decided

The committee said the current accommodative stance remains appropriate to support the recovery, alongside targeted financial measures. The rate has not moved since February 2026, which completed six cuts totalling 150 basis points that began in October 2024, according to Reuters.

The tone shifted slightly, however. The statement flagged the effects of keeping interest rates low for a long time on macro-financial stability. Assistant Governor Don Nakornthab, who serves as MPC secretary, told reporters that "the monetary committee sees that low rates will have a long-term effect," and said rates could rise gradually if the economy proves strong enough, Reuters reported. Commerzbank analyst Charlie Lay described the statement as "less dovish" in a note carried by FXStreet, while adding that a hike is not imminent.

The October 2026 forecasts at a glance

Source: Bank of Thailand MPC statement, October 28, 2026; previous forecasts as reported by Reuters (via AOL) and Thailand Business News. Tourist arrivals were each cut by 1 million from the prior forecast, per Reuters.

Why the growth upgrade is narrow

The upgrade rests almost entirely on the external sector. The Bank of Thailand said exports and private investment linked to the technology and AI cycle have beaten expectations, with merchandise exports showing "stronger-than-expected momentum." The bank now expects export values to rise 22% in 2026, compared with 14% in its June forecast, Reuters reported.

The rest of the economy looks softer. Private consumption is held back by high household debt, a fragile labour market and weak purchasing power, the MPC said, and low-income households are the most exposed. The 2026 consumption forecast was trimmed to 2.3% from 2.6%, according to Thailand Business News. Higher oil prices are also expected to reduce foreign tourist arrivals, a key earner for Thailand. Second-quarter GDP grew 1.9% year on year, slowing from 2.8% in the first quarter, according to Reuters.

The bank also noted that its forecasts do not yet reflect a revision to the Manufacturing Production Index that widens coverage of electronics plants, including laptops and data-processing equipment, Thailand Business News reported. That revision could change how strong factory activity looks.

What it means for Thai borrowers and SME credit

A hold at 1.00% keeps loan pricing steady. The MPC said private-sector borrowing costs have stayed broadly stable and in line with the policy rate, even as Thai government bond yields edged higher.

Access to credit is the bigger problem for smaller firms. Overall lending has picked up, but mostly through large companies borrowing for working capital and some new investment. Using August data, Thailand Business News reported large corporate loans up 6% year on year, retail loans up 0.8% and SME loans down 1.4%. The central bank said SME lending is contracting in almost every sector as lenders stay cautious about higher-risk borrowers, and that repayment capacity of SMEs and vulnerable households needs close monitoring.

In other words, a lower or unchanged policy rate does little for a business that cannot get a loan. The MPC called for fiscal and financial support, including debt resolution and liquidity help for SMEs, rather than further rate cuts.

Inflation: why a temporary jump above 3% is likely

Thailand's headline consumer price index rose 2.82% year on year in September, up from 2.53% in August, the Trade Policy and Strategy Office (TPSO) said on October 6, according to The Nation. Energy contributed 1.85 percentage points of that, more than 60% of the total. Core inflation was 1.50%. The target band is 1% to 3%.

The Bank of Thailand expects inflation to keep rising through the rest of 2026 and into early 2027, driven by energy prices and El Niño, before base effects and weak demand pull it back. The full-year arithmetic shows how sharp that rise could be. Headline inflation averaged 1.54% from January to September, per TPSO data reported by The Nation. For the 2026 average to reach the central bank's 2.1% forecast, October–December inflation would need to average roughly 3.6% to 4.0% (a Bullquill calculation that allows for rounding in the 2.1% figure). That would be above the 3% ceiling for the quarter.

The MPC said medium-term inflation expectations remain anchored within the target range and that it will watch core inflation closely. Upside risks it listed include Middle East tensions, El Niño, limited room for energy subsidies and firms passing on higher costs. The way oil shocks feed into prices and policy is explained in our guide to how oil price shocks hit inflation and interest rates.

The baht: Fed bets, oil and a low rate gap

The MPC said the baht has weakened against the US dollar as markets moved toward a tighter US monetary policy outlook, with higher oil prices adding pressure because Thailand imports much of its energy. Commerzbank said USD/THB was unchanged at about 33.73 on October 29, near the top of the 32.50–34.00 range it has traded in over the past five months, in a note published by FXStreet at 17:22 UTC on October 30.

Commerzbank pointed to three sources of downside pressure on the baht: Fed tightening, higher oil prices, and Thailand's relatively low interest rates. It also noted the central bank's projection of an $18 billion current-account surplus in 2027, which could support the currency over the medium term. Other ASEAN currencies face similar forces; see our coverage of the Philippine peso's record low and the rupiah near its record low. The US side of the story is in our explainer on the Fed's rate-hike debate.

Thailand is now an outlier in the region. The Bank of Thailand has not changed rates since the Middle East conflict began, while the Philippines has raised rates, Reuters noted. Bank Indonesia, by contrast, held its BI-Rate at 5.75% in October.

What it means for SET-listed banks

For listed Thai lenders, a fourth straight hold means no fresh pressure on lending rates after the 150 basis points of cuts delivered between October 2024 and February 2026. But loan growth remains uneven: it is concentrated in large corporate clients, while SME lending is shrinking. The central bank described overall loan quality as stable while singling out SMEs and vulnerable households for monitoring. Any shift toward rate normalisation in 2027 would matter for bank margins and bond portfolios, which is why the tone of the December statement will be closely read.

What to watch next: December 23 and the 2027 rate debate

OCBC economists said they expect the Bank of Thailand to hold at the December 23 meeting and to start normalising in the first half of 2027, in a note carried by FXStreet. Commerzbank said a change of stance would require "a sustained rise in core inflation or a broad-based economic recovery."

Data that could tip the balance before December includes October and November CPI (TPSO), monthly export figures and third-quarter GDP from Thailand's national accounts office. A breach of the 3% inflation ceiling would test the bank's view that the jump is temporary and supply-driven.

What it means

The October decision tells investors that the Bank of Thailand sees two economies: an AI-linked export sector that is outperforming, and a domestic economy weighed down by household debt, weak consumption and shrinking SME credit. The central bank is not ready to tighten, but it is now openly discussing the costs of cheap money. For the baht, the low rate gap with the US remains a headwind; for borrowers, loan rates should stay steady; for banks, the question has moved from "how many more cuts" to "when does normalisation start."

This article is for information only and is not investment advice.