While elevated oil prices have caused inflation to rise, economists expect the Bank of Thailand to maintain its policy interest rate for the rest of 2026, assuming the higher costs will be temporary.
Wachirawat Banchuen, senior financial markets strategist at Siam Commercial Bank Financial Markets (SCB FM), said while the market believes Thai inflation has the potential to peak above 5% by the end of this year, it could decline in 2027 and return to the central bank's target range of 1-3%.
Therefore, the Monetary Policy Committee (MPC) may look to wait out the high inflation caused by a temporary uptick in energy prices, Mr Wachirawat told the Bangkok Post.
"Compared with the previous oil price crisis in 2022, when Russia invaded Ukraine, Thai inflation was as high as 6%, but the consumer price index is projected to average 3.6% this year," he said.
Thai GDP growth is weaker now, estimated at less than 2% compared with 2.6% in 2022, while current financial conditions are tighter than four years ago.
Supply chain disruption in 2022 was worse than it is today. Institute for Supply Management figures show delivery times for goods took longer in 2022 because the supply chain had just recovered from the pandemic, resulting in logistics and labour bottlenecks during that time, said Mr Wachirawat.
"Those factors resulted in higher cost-push inflationary pressure in 2022 than is occurring now, which means there is less urgency to raise interest rates," he said.
In 2022-23, the US raised interest rates by 5.25% in just over a year, while Thai rates hiked by 2% within a year.
"We don't expect that to happen with the current oil shock," said Mr Wachirawat.
For next year, SCB FM predicts interest rates are likely to remain unchanged.
"There is a higher chance of a rate cut if inflation returns to the target range as expected," he said.
"The Thai economy is softening, especially after the effects of government economic stimulus measures begin to wear off. The weakening economic picture will become more apparent, presenting a chance for the MPC to cut interest rates in a worst-case scenario if the economy deteriorates more than expected."
Economists from Kasikorn Research Center (K-Research) and Siam Commercial Bank Economic Intelligence Center (EIC) shared similar views, noting a rate cut is more likely next year.
"We don't see the need for the central bank to be in a rush to raise interest rates this year," Poonyawat Sreesing, senior economist at EIC, told the Bangkok Post.
"The central bank has repeatedly stated its 1% policy rate is suitable for current economic conditions. The EIC believes the MPC is likely to keep its bullet for when the economy really needs a rate cut."
Nuttaporn Triratanasirikul, deputy managing director of K-Research, said an interest rate hike was unlikely.
"The current supply-shock inflation is temporary, meaning it will fall at a later stage," she said.
Recently released figures show growth is concentrated in specific sectors, such as data centres, according to K-Research.
As a result, a rate cut might be needed next year to prop up economic growth, said Ms Nuttaporn.
