Central Bank Minutes: Inflation in Thailand likely to hit target more slowly

The Bank of Thailand’s Monetary Policy Committee (MPC) has revised its inflation projections, indicating that headline inflation will return to its 1–3% target range more slowly than previously anticipated. Headline inflation is now forecast at -0.1%, 0.3%, and 1.0% for 2025, 2026, and 2027, respectively, with a gradual normalization expected by the first half of 2027. The central bank attributes the subdued inflation primarily to structural supply-side factors, including lower global energy prices, government subsidies, and increased agricultural output, rather than weak domestic demand.

The MPC emphasized that current low inflation benefits households by easing cost-of-living pressures, particularly for indebted populations. However, it cautioned that further interest rate cuts would likely be ineffective in accelerating inflation, as the drivers are structural rather than demand-driven. The policy rate was cut by 0.25 percentage points in December 2025 to 1.25%, following three reductions in 2025 totaling 0.75 percentage points.

Economic growth projections remain cautious, with expansion expected at 2.2%, 1.5%, and 2.3% for 2025–2027, respectively. Challenges include U.S. trade policy impacts on exports, liquidity constraints for SMEs, and a strong Thai baht. The MPC will maintain a flexible inflation targeting framework, balancing price stability with growth support while monitoring risks such as global energy volatility and trade disruptions.

The central bank reiterated its commitment to a “cautious and outlook-dependent” policy stance, prioritizing macro-financial stability over aggressive stimulus amid limited policy space.