The UOB report, authored by Enrico Tanuwidjaja and Sathit Talaengsatya, discusses the Bank of Thailand’s (BOT) transition from interest rates alone to a broader policy framework. BOT aims to address structural economic problems such as low productivity and high inequality, while maintaining an accommodative interest rate policy. The report projects a final cut of 25 basis points in February 2026, which will raise the policy rate to 1.00% and is expected to be maintained until 2026-2027.

Strategic adjustments to BOT policy

“FX is becoming a more operational rather than merely communicative domain. The BOT has expressed concerns about the baht’s appreciation and non-fundamental flows, including gold-linked flows, which can at times be large compared to daily FX volumes (e.g. reaching 20% in some periods). The BOT also clearly highlights the strength of the baht (e.g. around 8% appreciation against the dollar since early 2025) and its readiness to intervene if movements become too rapid, alongside more stringent measures on gold-related foreign exchange activity.”

“Our basic assumption is that we expect the Monetary Policy Council to maintain its accommodative policy and make a final cut of 25 basis points at its meeting on February 25, 2026 – after the publication of GDP for Q4/2025 (we forecast growth in 2025 at 2.0%). This would raise the interest rate to 1.00%, which we believe will likely be maintained in 2026-2027.”

“That said, the BOT is likely to maintain an accommodative interest rate policy for an extended period of time, but will be reluctant to entrench a persistently low interest rate regime given the repeated emphasis on financial stability and preserving policy space.”

(This article was created with the assist of an artificial intelligence tool and has been reviewed by an editor.)