DBS Group Research expects the Bank of Thailand to keep its policy rate at 1.00% through end-2026. The rate was held at 1.00% after a unanimous vote at the 29 April meeting, near a four-year low.
The forecast is based on risks of weaker growth and higher inflation linked to Iran-related supply shocks and possible disruption in the Strait of Hormuz. These conditions are described as stagflationary pressures.
Inflation Growth And Policy Outlook
DBS raised its 2026 headline inflation forecast to 2.5% from 0.5%. It expects inflation to be within the BoT’s 1–3% target range in 2026 for the first time since 2023.
DBS projects 2026 GDP growth of 1.6%. This is close to the BoT projection of 1.5%.
The report indicates the BoT may avoid changing rates in coming months unless growth drops sharply or inflation pressures widen. The article notes it was produced using an AI tool and reviewed by an editor.
Given the expectation that the Bank of Thailand will hold its policy rate at 1.00% for the rest of 2026, directional bets on near-term rate changes are unlikely to be profitable. Traders should instead consider strategies that benefit from this stability, such as selling volatility in interest rate options. This prolonged pause is supported by the unanimous vote at the April 29th policy meeting.
Market Implications For Rates FX And Equities
We are navigating a challenging mix of slowing growth and rising prices. The recent Q1 2026 GDP data showed a disappointing 1.4% expansion, while the latest headline inflation for April accelerated to 2.7%, pushed higher by energy costs linked to Middle East tensions. This stagflationary environment limits the central bank’s options, making the policy hold the most likely path.
This economic pressure points toward continued weakness for the Thai Baht. A stagnant economy combined with low interest rates makes the currency less attractive for carry trades and foreign investment. The Baht has already reflected this, weakening over 4% against the US dollar since the start of the year to trade near 37.50.
For equity markets, this combination of weak growth and rising inflation presents a significant headwind for corporate earnings. We see increased downside risk for the SET Index as companies grapple with higher input costs and softer consumer demand. Derivative traders could therefore consider buying put options on the index to hedge against a potential market decline.
Looking back from our perspective today, these issues are an escalation of trends we saw developing through 2025. The economy struggled to gain significant momentum last year, with full-year growth barely reaching 2.2%. The current situation deepens those pre-existing concerns about the strength of Thailand’s recovery.
