Bangkok: The Governor of the Bank of Thailand reiterated that monetary policy will be used to "support the economy," maintaining the targets of controlling inflation and ensuring financial stability. The Governor of the Bank of Thailand affirmed that monetary policy aims to maintain price stability and the financial system, while supporting the economy, not stimulating it. He revealed that the policy interest rate has already been cut twice to 1%. He projected GDP growth of 2.3% this year, better than previously feared, but noted that the Thai economy still faces structural problems. He emphasized that Thailand is not suitable for quantitative easing (QE) and that the bank is prepared to manage the baht exchange rate when it experiences severe volatility.
According to Thai News Agency, Mr. Witai Rattanaporn, Governor of the Bank of Thailand (BOT), stated in the 2026 High-Level Economic Potential Development Program, "Opportunities and Survival in a Volatile Economic Era Amidst Global Geopolitical Conflicts," organized by the Economic Journalists Association in collaboration with Bangkok Bank Public Company Limited and the University of the Thai Chamber of Commerce, that during the period when the Thai economy faces volatility from war and geopolitical issues, many parties expect the BOT to intervene. However, it is important to understand that the function of monetary policy is distinctly different from fiscal policy. Monetary policy has two main missions: maintaining stability in the financial system, ensuring the stability of commercial banks and the payment system, and price stability, keeping inflation within the target range of 1-3%.
Mr. Witai emphasized that monetary policy also has another crucial function: supporting the economy, not stimulating it. This is because monetary policy, whether it's interest rates or currency values, affects a wide range of people. In contrast, fiscal policy's function is to stimulate the economy, helping it grow quickly, but in the short term. The Bank of Thailand implements its policy through its primary tool, the policy interest rate, through the Monetary Policy Committee (MPC). He acknowledged that the BOT has limitations in terms of tools and that adjusting interest rates cannot solve supply-side inflation problems, such as rising oil or raw material prices.
Regarding Thailand's economic outlook, the Bank of Thailand forecasts GDP growth of 2.3% in 2026. While this is better than the wartime concerns that might have resulted in growth of only 1.5% due to energy and raw material risks, it is still not considered a strong economy. Thailand faces structural problems including slower growth rates, inequality in access to resources for SMEs, a K-shaped recovery pattern, and dependence on exports in certain industries.
Since taking office, the Bank of Thailand has lowered the policy interest rate twice, to 1%, coupled with targeted measures to address long-term structural problems. The current inflation rate is seen as stemming from supply-side factors, while global oil prices have fallen faster than expected. This leads to a forecast that inflation this year will be below 2.8%, and will not exceed 4.5% for the entire year. Therefore, there is no need for a tight monetary policy at this time. By April next year, the high inflation base of this year will cause the inflation rate to gradually decline.
Regarding the proposal for the Bank of Thailand to use quantitative easing (QE), the Governor stated that it is not suitable for Thailand because, in the past, most of the money injected through the commercial banking system flowed back into deposits at the Bank of Thailand through repurchase agreement transactions. Meanwhile, the purchase of long-term bonds did not significantly transmit the effects on reducing private sector borrowing costs, and therefore did not produce the same impact on the economy as in many other countries.
Regarding the management of the Thai baht, Mr. Witai stated that the Bank of Thailand allows the exchange rate to fluctuate according to market mechanisms and will only intervene when the baht appreciates or depreciates rapidly and severely, affecting businesses and financial stability. Such interventions must adhere to international standards, including the US currency intervention guidelines, to avoid negative impacts on trade, investment, or future tax measures.