Thai Baht: Downside persists as BoT remains cautious about normalisation – Commerzbank

USD/THB is trading close to the upper end of its recent 32.50–34.00 range as the Bank of Thailand leaves its policy rate unchanged at 1.00%, according to Commerzbank’s Charlie Lay. While maintaining the hold, the MPC signalled a less dovish policy stance. Authorities flag risks to financial stability from an extended period of low rates and see room for gradual increases as growth strengthens, although they expect rates to remain unchanged through 2026–2027.

Will the policy hold give way to gradual hikes only later?

"The Bank of Thailand (BoT) left its benchmark one-day repurchase rate at 1.00% as expected. The Monetary Policy Committee (MPC) voted 6-0, with one member absent, marking its fourth consecutive hold since the 25bp cut in February. The policy statement suggests a subtle shift towards a less dovish stance, although an imminent rate hike is unlikely."

"BoT highlighted potential financial stability risks from keeping interest rates low for an extended period, while Assistant Governor Don Nakornthab indicated that rates could be raised gradually as the economy strengthens to rebuild policy space. However, with growth still below potential and inflation largely supply-driven, BoT is likely to remain on hold for the remainder of 2026 and potentially through much of 2027. We would need to see a sustained rise in core inflation or a broad-based economic recovery for a change in BoT’s stance."

"For THB, downside pressures persist due to Fed tightening, higher oil prices, and Thailand's relatively low interest rates. USD/THB was unchanged yesterday at around 33.73. It remains at the upper end of the 32.50-34.00 range seen over the past five months."

"BoT's projection of a USD18bn current-account surplus in 2027 could provide some medium-term support for THB, although the currency is likely to remain sensitive to USD movements and global energy prices in the near term."

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