The Bank of Laos (BOL) has cut its seven-day base interest rate from 8 percent to 7 percent a year as inflation remains below the government’s 8 percent target.
The Monetary Policy Committee approved the cut at its meeting on 20 August, where it reviewed monetary policy, economic conditions, fuel prices, exchange rates and financial stability.
According to BOL, the latest decision shows continued monetary stability, with inflation remaining close to the government’s target, while the exchange rate and money supply remained within planned levels.
Inflation fell from 10.2 percent in April to 7.4 percent in June as lower fuel and transport costs and a more stable exchange rate eased pressure on consumers. But inflation edged up to 7.6 percent in July, driven mainly by surging electricity costs and continued pressure from high transport, fuel, and service prices.
Policy, Ongoing Economic Risks
The BOL will also extend foreign exchange market operating hours by one hour, from 9 AM to 4 PM.
Despite easing inflation,the central bank warned of several risks to economic stability, including slower global growth, volatile gold and oil prices, and political uncertainty in the Middle East.
Domestic challenges also remain. High demand for foreign currency to service debt, continued use of multiple currencies and other structural weaknesses are limiting the effectiveness of monetary policy, according to the BOL.
The central bank said it will continue using a mixed monetary policy approach, including tighter foreign exchange management, centralizing government deposits, improving payment systems and coordinating with other sectors on fuel supplies, imports and economic stability.
Previous Changes
The latest decision extends a series of cuts to the BOL’s seven-day base rate over the past year.
In August 2025, the central bank cut the rate from 9.5 percent to 9 percent, followed by another reduction to 8.5 percent in November 2025 as it sought to support liquidity and credit growth amid global uncertainty, exchange-rate fluctuations and weak domestic lending.
The rate was later cut to 8 percent in 2026. The BOL kept it at that level in May before reducing it again this week.
