UOB economists Enrico Tanuwidjaja and Sathit Talaengsatya expect the Bank of Thailand to cut the 1-day repurchase rate by 25 bps to 1.00% from 1.25% at the 25 February 2026 Monetary Policy Committee meeting. They describe 1.00% as the terminal rate in the current cycle.<\/p>\n
Their assessment links the decision to the central bank\u2019s flexible inflation targeting objectives: growth, inflation, and financial stability. It also notes projections of below-potential growth and subdued inflation.<\/p>\n
They place a 2026 cyclical nominal neutral rate range at 0.75% to 1.25%, with a midpoint of 1.0%, citing depressed inflation expectations and a Fisher equation framework. On this basis, a move to 1.00% would be closer to neutral or mildly accommodative in real terms.<\/p>\n
The analysis refers to supporting demand and reducing debt-deflation risks, while avoiding an \u201caggressively low\u201d policy stance. It also mentions the risk of \u201csearch-for-yield\u201d behaviour and longer-run financial stability concerns.<\/p>\n
The article states it was created with the help of an Artificial Intelligence tool and reviewed by an editor. It is attributed to the FXStreet Insights Team.<\/p>\n
Given the high probability of a rate cut next week, traders should prepare for increased downside pressure on the Thai baht. We believe the central bank has a strong case for easing, especially after recent data confirmed a persistent slowdown. For example, the final GDP figures for 2025 showed growth of only 1.9%, missing government targets, while January 2026 inflation registered a mere 0.7%, far below the official 1-3% target range.<\/p>\n
This economic backdrop makes short-term interest rate derivatives attractive. We see value in swap contracts that position for lower floating rates in the months ahead, directly reflecting the expected policy move. The argument that this 25 basis point reduction will be the cycle’s terminal rate suggests that positioning should be focused on the immediate aftermath of the February 25th meeting.<\/p>\n
For currency traders, buying USD\/THB call options expiring in March or April is a straightforward strategy. This allows for participation in a potential weakening of the baht while capping the maximum risk involved. The move is not just about weak growth but also about managing debt-deflation risks in a low-inflation environment.<\/p>\n
Historically, we have seen the Bank of Thailand act preemptively to support the economy, as it did during the 2020 slowdown when it aggressively cut rates to a record low. This time, the cut to 1.00% is viewed as an “insurance” policy rather than the start of a deep easing cycle. Therefore, derivative plays should be tactical and timed around the upcoming announcement, as the market will quickly price in 1.00% as the new floor.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" UOB expects Bank of Thailand to cut repo rate to 1.00%, terminal; neutral range 0.75\u20131.25%.<\/p>\n","protected":false},"author":62,"featured_media":17021,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-42331","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\n\t\t