UOB’s Global Economics & Markets Research, led by Enrico Tanuwidjaja and Sathit Talaengsatya, argues that Thailand’s latest Consumer Price Index (CPI) data confirms a cost-driven rather than demand-led inflation backdrop. They forecast headline inflation at 1.4% for 2026 and 1.2% for 2027 and expect the BOT to keep the 1-day repo rate at 1.00% through 2026 and 2027.
Cost-push inflation supports stable BOT stance
“That said, taking into account the upside risks, we maintain our estimate for headline inflation at 1.4% for 2026 and 1.2% for 2027, and our call on the BoT to keep the policy rate at 1.00% through the end of 2026 and 2027.”
“The authorities’ formal 2026 inflation forecast remains at 1.5%-2.5%, with a 2.0% midpoint, based on Dubai crude at USD75-85/bbl, USD/THB at 32.5-33.5, and GDP growth at 1.5%-2.5%; its latest end-May slide path put the 2026 average at 2.32% The BoT’s official view is more aggressive on this: It expects headline CPI to be 2.9% in 2026 or 3.0% after including government measures, before falling to 1.4% in 2027 as the energy shock and base effects fade.”
“The CPI reinforces our view – not challenges – that Thailand is absorbing negative terms of trade shocks rather than entering a domestic overheating cycle. We maintain our headline CPI forecasts at 1.4% in 2026 and 1.2% in 2027, while supporting the 2H2026 fiscal year on energy costs, low base of last year, wage-setting, services prices and FX pass-through. Let’s monitor the incentives.”
“This difference matters for policy. It supports our call that the BOT keep the policy rate at 1.00% until 2026-27: rate increases will do little to reduce oil, freight, or food-input costs, while another broad-based cut will be hard to justify when headline inflation is near the upper end of the target range. The BOT can credibly look at shocks only as long as “That medium-term inflation expectations remain stable and that second-round effects are not widespread across wages, services prices, and FX pass-through.”
“The authorities’ formal 2026 inflation forecast remains at 1.5%-2.5% with a 2.0% midpoint, based on Dubai crude USD75-85/bbl, USD/THB 32.5-33.5 and GDP growth of 1.5%-2.5%; its latest end-May slide path puts the 2026 average at 2.32%.”
(This article was created with the help of an artificial intelligence tool and reviewed by an editor.)
