APAC Economic Perspectives "BoT: A longer, but likely not indefinite, hold" Lim

Research evidence excerpt

APAC Economic Perspectives "BoT: A longer, but likely not indefinite, hold" Lim

h forecast at 2.2%/2.6% and private consumption at 2.2%/2.1% in

2026/27.

Inflation risks moderating, but vigilance remains

The BoT continued to characterize recent price pressures as largely supply-driven and

temporary. While the BoT kept its inflation forecasts broadly “in line with the previous

assessment” at 2.8% and 1.4% for 2026/27 (about 0.1ppt below the April forecast),

the underlying assumptions have shifted. In April, the baseline was built on a prolonged

energy shock, with Dubai crude assumed at US$100 in 2026 and US$80 in 2027. By

June, these assumptions were revised down to US$90/80, reflecting the improving

Middle East backdrop. That said, the BoT does not appear fully relaxed on inflation.

While risks are now more contained, they remain present, with CPI expected to peak at

4.5% in Q4 2026 and upside risks from factors such as El Niño. BoT said it will “closely

monitor inflation developments and medium-term inflation expectations,” and flagged

higher input costs that have passed through indirectly to food, and parts of core

inflation.

On the weaker baht, credit growth, and fiscal-monetary policy coordination

On credit, the June statement still characterizes overall growth as subdued, and uneven.

However, early signs of recovery are emerging beneath the surface. In line with the MPS,

the BoT’s banking sector brief for Q1 (link) shows that lending to large corporates has

resumed expansion, reflecting stronger working-capital demand and improving activity,

even as SME and household credit remain weak. In other words, the credit cycle is no

longer uniformly soft, with recovery beginning in stronger segments of the economy. On