Thailand: Supply-led pressures and prolonged hold for BoT – UOB

UOB Global Economics & Markets Research, led by economists Enrico Tanuwidjaja and Sathit Talaengsatya, analyzes Thailand’s July CPI undershoot driven by lower fuel prices while core inflation edges higher. They emphasize that inflation remains supply-led, with upstream PPI still elevated, and maintain forecasts for headline CPI at 2.8% in 2026 and 1.4% in 2027 alongside a steady BOT policy rate at 1.00% through end-2027.

Supply-led CPI and policy outlook

"Jul headline CPI eased to +1.95% y/y and -0.73% m/m, from +2.42% y/y and - 0.34% m/m in Jun, undershooting the +2.55% Reuters consensus and the BOT’s earlier monthly reference path. Core CPI nevertheless firmed to +1.34% y/y and +0.08% m/m, signaling continued, albeit contained, indirect cost pass-through."

"The BOT’s Jun baseline projects headline inflation at 2.8% in 2026 and 1.4% in 2027, and core inflation at 1.5% and 1.4%, respectively, as supply pressures and unfavorable base effects fade next year."

"We maintain our headline CPI forecasts at 2.8% in 2026 and 1.4% in 2027 and expect the BoT to hold its policy rate at 1.00% through end-2027. The principal swing factors remain oil, THB, and the current account—not a domestic demand-led tightening cycle."

"A prolonged hold therefore offers the best balance between maintaining price stability and avoiding an unnecessary tightening of already-fragile financial conditions."