The Bank of Thailand (BOT) is calling for stricter regulation of gold trading after surges in transactions contributed to the sharp appreciation of the Thai baht, the central bank’s governor said on Thursday. At the same time, the BOT signaled readiness to ease monetary policy further, even as key interest rates have been reduced to a three-year low.

Gold Trading Driving Baht Volatility

Governor Vitai Ratanakorn highlighted that gold trading flows have become a major driver of daily currency movements.

“On days when the baht strengthens sharply, gold trading transactions account for about half of the flows pushing the baht up,” he said, noting that large gold dealers now handle trading volumes equivalent to roughly 50% of Thailand’s GDP.

The BOT emphasized that while gold trading regulation is required, there are currently no plans to impose taxes on gold transactions. Gold traders have opposed any taxation, warning it could severely impact the sector.

“The central bank is doing everything it can, expanding all measures as far as possible. We have the Foreign Exchange Act, but it doesn’t cover the gold trading business. There needs to be someone to regulate the gold trade,” Vitai added.

Managing the Baht

The Thai baht has surged 9.1% against the U.S. dollar in 2025, making it one of Asia’s best-performing currencies. This sharp appreciation has complicated the economic outlook, adding pressure to Thailand’s second-largest economy, which faces challenges such as high household debt, U.S. tariffs, political uncertainty ahead of February 2026 elections, and border tensions with Cambodia.

The BOT clarified that its focus is on reducing baht volatility, rather than directly setting the currency’s level. Measures such as capital inflow or outflow taxes are not currently being considered.

“We cannot use overly drastic measures, such as imposing taxes as we did in 2010, which caused the market to crash immediately, or banning inflows and outflows,” Vitai said.
“We manage it every day to ease volatility… but we cannot set the currency’s level.”

Interest Rate Outlook

Thailand’s monetary policy space is limited after five rate cuts totaling 125 basis points since October 2024, bringing rates to their lowest level in three years. However, the BOT indicated that it is ready to cut rates further if necessary, although very low rates could have limited impact on inflation and may negatively affect savings.

Economists expect the BOT to consider another interest rate reduction at its next review on February 25, 2026. Despite negative inflation trends, Vitai emphasized that Thailand is not yet facing deflation, and structural challenges will require targeted fiscal and monetary measures beyond standard rate cuts.

Supporting Credit and Investment

The BOT plans to introduce loan guarantee schemes next week to encourage credit growth and investment. Governor Vitai emphasized the close coordination between monetary and fiscal policies, citing strong cooperation with Finance Minister Ekniti Nitithanprapas.

“Monetary and fiscal policies are well coordinated. The finance minister has never interfered in matters related to the policy interest rate,” Vitai noted.

Economic Growth Forecast

The Bank of Thailand projects economic growth of 2.2% for 2025 and 1.5% for 2026, slightly below last year’s 2.5% expansion. The BOT continues to monitor domestic and external factors affecting the economy, including currency volatility, gold trading flows, and global economic conditions.