Thailand: BOT’s pivot to broader measures – UOB

UOB's report by Enrico Tanuwidjaja and Sathit Talaengsatya discusses the Bank of Thailand's (BOT) shift from solely using interest rates to a broader policy framework. The BOT aims to address structural economic issues such as low productivity and high inequality while maintaining an accommodative interest rate policy. The report anticipates a final 25bps cut in February 2026, bringing the policy rate to 1.00%, which is expected to be sustained through 2026-27.

BOT's strategic policy adjustments

"FX becomes a more operational domain, not just a communications domain. The BOT has raised concerns about baht appreciation and non-fundamental flows, including gold-linked flows that can at times be large relative to daily FX turnover (e.g., reaching 20% in some periods). The BOT also explicitly highlights the baht’s strength (e.g., about 8% appreciations against USD since early 2025) and its willingness to intervene if moves are too fast, alongside tighter measures on gold-related FX activity."

"In our baseline, we expect the MPC to keep policy accommodative and deliver one final 25bps cut at the 25 Feb 2026 meeting—after the 4Q25/full-year 2025 GDP release (we forecast 2025 growth at 2.0%). This would take the policy rate to 1.00%, which we think is likely to be maintained through 2026–27."

"That said, the BOT is likely to keep interest rate policy accommodative for longer but will be reluctant to entrench a permanently-low-rate regime given repeated emphasis on financial stability and preserving policy space."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)