Central bank keeps policy steady at 1.00% while warning that recovery remains fragile, uneven and exposed to inflation risks

Thailand’s central bank held interest rates steady on Wednesday, choosing caution over fresh stimulus even as it upgraded the country’s growth outlook following a new government borrowing plan aimed at supporting a still-fragile economy.

The Bank of Thailand kept its benchmark policy rate at 1.00%, a decision broadly expected by economists after earlier cuts designed to shore up domestic demand. The move reflects a delicate balancing act: policymakers see enough improvement to raise their 2026 growth forecast, but not enough strength to declare a full recovery.

The central bank now expects the Thai economy to expand by 2.3% this year, up from its previous estimate, after the government announced additional borrowing of 400 billion baht, equivalent to about $12 billion. Officials also slightly raised the 2027 growth forecast to 1.8%.

Yet the improved projections come with a warning. Thailand’s rebound remains uneven, with households and smaller businesses still under pressure from high debt, weak income growth and rising living costs. Tourism and exports have provided support, but domestic consumption has remained subdued, limiting the breadth of the recovery.

Inflation is another source of concern. The central bank expects price pressures to rise above its target range later this year, driven largely by global energy costs. Headline inflation is forecast to climb in the near term before easing in 2027, but policymakers signaled they remain ready to adjust rates if inflation accelerates more sharply than expected.

The decision also comes as Asian economies face a complicated global backdrop. A strong U.S. dollar has weighed on regional currencies, including the Thai baht, while capital outflows and shifting expectations for global interest rates have added volatility to financial markets. The Bank of Thailand said it was prepared to manage excessive currency movements if needed.

For now, the central bank appears to be preserving room for maneuver. Raising rates too quickly could hurt a weak recovery, while cutting further could risk adding pressure on inflation and the currency. By holding steady, policymakers are betting that fiscal support, exports and tourism can keep growth on track without forcing a more aggressive monetary response.

Thailand’s next rate decision, scheduled for August, will test whether the upgraded outlook is durable or merely a temporary lift from government spending. The central question remains whether the country can turn a cautious rebound into a broader recovery felt by households, businesses and investors alike.