Thailand’s central bank kept its policy interest rate at 1.00% on Wednesday, saying stronger technology-related exports and investment were supporting the economy while household spending and lending to smaller businesses remained weak.
The Bank of Thailand’s Monetary Policy Committee voted unanimously to leave the rate unchanged. It was the third consecutive meeting without a change after the bank cut the rate from 1.25% to 1.00% in February.
The policy rate is the short-term interest rate set by the central bank. It influences borrowing costs across the economy, although changes do not pass through to every business or household at the same speed.
At 1.00%, policy remains supportive by Thailand’s recent standards. The central bank nevertheless faces an awkward balance: growth is subdued and uneven, but higher costs linked to weather and global risks could still lift inflation in the coming months.
Technology exports are helping, but the gains are narrow
The committee said merchandise exports and private investment had performed better than expected, supported by the global technology and artificial intelligence cycle. Demand for electronics and related equipment can benefit Thai factories and encourage companies to invest in new capacity.
However, the central bank also warned that these activities depend heavily on imported inputs. That limits the amount of income and demand that remains inside Thailand.
This is a useful distinction. A country can record strong export sales without receiving the full economic benefit if much of the value in those exports comes from components made elsewhere. The activity still supports production and logistics, but its wider effect on local suppliers, wages and household spending may be smaller.
Official figures show why the central bank remains cautious. Thailand’s economy grew 1.9% from a year earlier in the second quarter, down from 2.8% in the first, according to the National Economic and Social Development Council. On a seasonally adjusted quarter-to-quarter basis, output declined 0.2%.
The Bank of Thailand said private consumption had grown more slowly than expected as households became more careful amid rising living costs. The tourism sector also lost momentum during the second quarter as higher energy costs and travel disruption affected activity.
Credit is reaching large companies more readily than SMEs
The unevenness is also visible in bank lending. Overall credit growth has picked up, but the improvement has been led by loans to large companies. Much of that borrowing was for working capital, which businesses use to cover day-to-day operating needs such as inventory, payroll and supplier bills.
Loans to small and medium-sized enterprises continued to contract. Banks remained cautious about lending to higher-risk borrowers, while the central bank said the repayment ability of SMEs and financially vulnerable households required close monitoring.
This creates a limit to what a low policy rate can achieve. Cheap central-bank funding can make credit more affordable in general, but it cannot force commercial banks to lend when they are worried about a borrower’s ability to repay. That is why the committee also called for targeted financial measures aimed at viable SMEs and vulnerable groups.
The gap matters for the quality of growth. If investment and credit are concentrated among large companies connected to export supply chains, headline indicators can improve while smaller firms and domestic consumers continue to struggle.
Lower inflation gives the bank room to wait
The central bank lowered its inflation assessment for 2026 and 2027, mainly because global energy prices were softer than previously expected. Core inflation, which excludes some volatile items, was also expected to be slightly lower because companies had passed less of their cost increases on to customers.
Inflation is still expected to rise through the first quarter of 2027 as El Niño affects supply and businesses gradually pass on higher costs. The bank expects it to ease again afterwards as those effects fade and weak domestic demand limits price increases.
The decision was widely anticipated. A Reuters poll cited by The Business Times found that 30 of 32 economists expected the rate to remain at 1.00%.
Keeping the rate unchanged preserves some room to respond if growth deteriorates, while avoiding another cut at a time when inflation risks have not disappeared. The baht has also been volatile as investors reassess US interest rates and geopolitical developments.
The central bank’s message was therefore not that Thailand’s economy lacks growth. It was that the sources of growth are concentrated. Technology exports and large-company investment are doing more work, while households and smaller businesses remain the weaker side of the recovery.
