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 call 1.00% the terminal rate in the current cycle.
They link this expected move to the central bank’s flexible inflation targeting goals: growth, inflation, and financial stability. They also point to forecasts of below-trend growth and soft inflation.
Neutral Rate Framework
They estimate the 2026 cyclical nominal neutral rate at 0.75% to 1.25%, with a midpoint of 1.0%. They base this on low inflation expectations and a Fisher equation framework. Under this view, a cut to 1.00% would put policy closer to neutral, or slightly accommodative, in real terms.
They say the goal is to support demand and reduce debt-deflation risk, without pushing rates to an “aggressively low” level. They also flag the risk of “search-for-yield” behaviour and longer-term financial stability issues.
The article says it was created with help from an Artificial Intelligence tool and reviewed by an editor. It is credited to the FXStreet Insights Team.
With a rate cut next week looking likely, traders should be ready for more downside pressure on the Thai baht. We think the central bank has a solid case to ease, especially after recent data confirmed an ongoing slowdown. For example, final 2025 GDP growth came in at just 1.9%, below government targets. January 2026 inflation was only 0.7%, well under the official 1–3% target range.
Trading And Hedging Approaches
This backdrop makes short-term interest rate derivatives more appealing. We see value in swap contracts that benefit from lower floating rates in the coming months, which would match the expected policy move. If this 25 bp cut is truly the terminal rate for the cycle, positioning should focus on the period right after the 25 February meeting.
For FX traders, buying USD/THB call options with March or April expiry is a simple approach. It offers exposure to a weaker baht while limiting maximum risk. The move is not only about weak growth, but also about managing debt-deflation risks in a low-inflation environment.
In the past, the Bank of Thailand has moved early to support the economy, including during the 2020 slowdown when it cut rates to a record low. This time, a move to 1.00% is seen as “insurance,” not the start of a long easing cycle. Because of that, derivative trades should be tactical and timed around the decision, since markets may quickly treat 1.00% as the new floor.
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