Thailand: Cost-push spike, steady BoT rate – UOB

UOB economists Enrico Tanuwidjaja and Sathit Talaengsatya argue that Thailand’s sharp April Consumer Price Index (CPI) jump is driven mainly by energy and selective food pass-through rather than broad demand-led reflation. They keep headline CPI forecasts at 1.4% for 2026 and 1.2% for 2027 and expect Bank of Thailand (BoT) to hold the policy rate at 1.00% through 2027.

Energy shock drives Thai inflation spike

"We keep our inflation projection unchanged: headline CPI at 1.4% in 2026 and 1.2% in 2027, and BOT on hold at 1.00% through 2026–27. The Apr print raises near-term upside risks, but weak demand, a negative output gap, administrative price smoothing, and limited wage-price spiral risk should cap second-round effects."

"Looking ahead, the official inflation outlook has shifted higher, but authorities still treat the shock as supply-led and monitorable rather than persistent domestic overheating. In its written base case, the Ministry of Commerce (MOC) maintains its 2026 headline inflation forecast range 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%. The MOC expects May inflation to remain positive, supported by domestic retail oil prices, prepared-food pass-through, higher pork and chicken prices, higher travel costs, and broader producer-cost pressure, partly offset by cost-of-living measures, lower electricity charges versus last year, and the slow recovery of fresh-fruit prices."

"In terms of monetary policy, the BOT’s MPC voted unanimously 6–0 on 29 Apr to maintain the policy rate at 1.00%. The BOT now forecasts GDP growth of 1.5% in 2026 and 2.0% in 2027, headline CPI of 2.9% in 2026 and 1.5% in 2027, and core CPI of 1.6% and 1.5%, respectively. Importantly, the central bank still expects price increases to be neither broad-based nor persistent under weak demand conditions, with medium-term inflation expectations anchored."

"We also maintain our call that BOT will keep the policy rate unchanged at 1.00% through 2026 and 2027, looking through first-round supply-side inflation unless second-round effects broaden into wages, services prices, inflation expectations, or disorderly FX pass-through."

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