Baht: Thailand Central Bank Expected to Extend Policy Pause – DBS

DBS economists Taimur Baig and Radhika Rao said in a forward-looking note that the Bank of Thailand is likely to keep its policy rate unchanged at 1.00% at the upcoming August meeting, extending the pause that began with the unanimous decision in June. The core logic behind this assessment is that the room for further monetary policy easing is narrowing.

**Dual Pressures from Inflation and Growth**

DBS analysis suggests that the Thai economy faces dual downside risks from inflation and growth, while credit conditions are tightening. This combination of macroeconomic conditions implies that a hasty rate cut could have limited effect or even negative consequences. DBS economists noted that the risks of further easing lean to the downside, making a wait-and-see stance and an extended policy pause the more prudent choice. According to another forecast by DBS Group Research, given the persistent impact of stagflationary pressures on growth and inflation, the Bank of Thailand may even keep rates anchored at 1.00% until the end of 2026.

**A Rational Choice Under Limited Policy Space**

Against the backdrop of heightened global trade uncertainty and geopolitical disruptions, small open economies often find themselves more passive in monetary policy. DBS's view implies that the Bank of Thailand needs to preserve its limited "ammunition" to address potentially larger shocks in the future. Holding steady at present is both a confirmation of the current economic state and a way to leave room in the policy toolkit. Market reports indicate that tighter credit conditions have begun to weigh on domestic demand, further reducing the effectiveness of rate-cut stimulus.