Kyrgyz central bank lowers policy rate to 6% amid slowing inflation

By bne IntelliNews June 1, 2016

The National Bank of the Kyrgyz Republic has lowered its policy interest rate by 200 basis points to 6%, the bank said on May 31.

The decision was based on the continuing downward trend of the inflation rate, which is mainly driven by falling domestic prices for food and declining domestic demand, the bank said in a statement published on its website. Annual inflation eased sharply to 0.2% as of May 20 from 3.4% at beginning of the year. 

Given weak inflationary pressures and the current slowdown in economic activity in the country, the decision to lower the policy rate supports “measures to stimulate the real economy while maintaining low inflationary risks”.  

The bank also reiterated that Kyrgyzstan’s economy shrank by 4.9% in January-April. Economic growth this year is projected to weaken to 1% from 3.5% in 2015, according to the EBRD's latest forecast published in May.

The central bank will continue its policy of maintaining a 5% to 7% inflation rate “in the medium term”, the statement read.

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