Treasury yields tick higher ahead of Federal Reserve interest rate decision

BANGKOK, October 28 - The Bank of Thailand's monetary policy committee decided to keep the one-day repurchase rate at 1.00 percent for a fourth consecutive meeting on Wednesday, as anticipated. Economists surveyed by Reuters had also predicted the policy rate would remain unchanged, with most foreseeing it would stay the same through the end of 2027. The committee believes the current rate is suitable for fostering economic recovery.

Inflation has risen temporarily due to supply-side factors, but the committee will keep monitoring the inflation outlook and associated risks, along with the implications of low interest rates on long-term macro-financial stability, the central bank stated. It predicted the economy would expand by 2.4 percent this year and 2.1 percent in 2027, slightly higher than its previous June forecasts of 2.3 percent and 1.8 percent. The bank noted that growth remains below its potential.

Southeast Asia's second-largest economy saw annual growth of 1.9 percent in the second quarter of the year, down significantly from 2.8 percent in the previous quarter. In contrast, growth slowed to 2.4 percent in 2024, lagging behind regional peers. The central bank's next rate-setting meeting is scheduled for December 23. The Thai baht remained relatively stable following the decision.

Unlike many other central banks that have increased interest rates to tackle inflation linked to the Middle Eastern conflict, Thailand has maintained its policy rate unchanged since the war began. The bank had previously lowered the rate six times, by a total of 150 basis points, between October 2024 and February 2026 to stimulate the economy, which has been dealing with weak domestic demand and high household debt.

A recent interview revealed that Deputy Governor Piti Disyatat expects the central bank's monetary policy to remain accommodative for now and the policy rate to normalize once the economy is ready.

September's annual headline inflation rose to 2.82 percent, still within the central bank's target range of 1 percent to 3 percent. The bank now anticipates inflation at 2.1 percent this year, up from 2.2 percent previously expected, and 2.8 percent in June. For 2027, they forecast headline inflation at 1.3 percent compared to the 1.4 percent projected earlier this month and in June.