Surat Tanboon, Senior Director of the Monetary Policy Department at the Bank of Thailand, disclosed that the baht is currently moving mainly in line with the US dollar, driven by developments in the global economy, monetary policy actions of major economies, and geopolitical tensions. As for concerns over the interest rate differential between Thailand and the United States, the Bank of Thailand assesses that financial markets have already anticipated and priced in this factor in advance, as reflected in the baht's continued good stability in the recent period. Meanwhile, the Bank of Japan's decision to raise its policy rate to 1.25% is a level that is not significantly far from Thailand's interest rate, and the Bank of Japan's 7-to-2 vote clearly reflects a lack of consensus, prompting financial markets to scale back expectations for Japan's next rate hike. Surat stressed that Thailand's current policy rate is appropriate for the country's context, and that monetary policy going forward will be guided mainly by economic trends. He assessed that the Thai economy is still recovering below its potential and that the recovery is uneven, while inflation is likely to rise on supply-side factors and is expected to gradually decline in 2027. On the external stability of Thailand's financial system, it remains strong with thick buffers, reflected in net international reserves of more than 300 billion US dollars, which exceeds international benchmark standards and covers short-term external debt by 2.8 times. Surat said that given this strong stability, the risk of severe capital outflows is limited in scope. Although some capital flowed out of Thailand during the conflict in the Middle East, it was a very small proportion compared with regional neighbours. The Bank of Thailand is therefore not concerned about the current capital movement situation. In addition, statistics from the start of 2026 to the present show that capital flows remain in a net inflow position into Thai assets, totalling more than 50 billion baht, with continuous accumulated buying in both the stock market and the bond market.
BOJ raised policy rate to 1.25% with a divided 7-2 vote, and markets scaled back expectations for further hikes, capping JGB 10Y yield upside.
