UOB’s Global Economics & Markets Research, led by Enrico Tanuwidjaja and Sathit Talaengsatya, argues that Thailand’s latest Consumer Price Index (CPI) data confirm a cost-push rather than demand-led inflation backdrop. They keep headline inflation forecasts at 1.4% for 2026 and 1.2% for 2027 and expect the BoT to maintain the 1-day repo rate at 1.00% through 2026 and 2027.

Cost-push inflation supports steady BOT stance

"That said, while noting the upside risks, we maintain our projection for headline inflation at 1.4% for 2026 and 1.2% for 2027, and our call for BoT to keep the policy rate at 1.00% through end-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 of 1.5%–2.5%; its latest end-May slide path put the 2026 average at 2.32%. BoT’s official view is more hawkish on the near-term headline path: it expects headline CPI at 2.9% in 2026, or 3.0% after incorporating government measures, before falling to 1.4% in 2027 as the energy shock and base effects fade."

"May CPI reinforces—not challenges—our view that Thailand is absorbing a negative terms-of-trade shock, rather than entering a domestic overheating cycle. We maintain our headline CPI forecasts at 1.4% in 2026 and 1.2% in 2027, while monitoring energy costs, 2H2026 fiscal stimulus against last year’s low base, wage-setting, services prices, and FX pass-through."

"That distinction matters for policy. It supports our call that the BoT keeps the policy rate at 1.00% through 2026–27: a rate hike would do little to lower oil, freight, or food-input costs, while another broad-based cut would be harder to justify when headline inflation is near the upper end of the target range. The BoT can credibly look through the shock only as long as medium-term inflation expectations remain anchored and second-round effects do not broaden into 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 at USD75–85/bbl, USD/THB at 32.5–33.5, and GDP growth of 1.5%–2.5%; its latest end-May slide path put the 2026 average at 2.32%."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)