Mongolia’s central bank cuts interest rates by 100 bp

By bne IntelliNews January 15, 2016

The Bank of Mongolia has lowered its policy interest rate by 100 basis points to 12% amid low and stable inflation and expected low demand-pull inflationary pressure, the central bank said in a statement on January 14.

Annual consumer price inflation (CPI) stood below the targeted inflation level (8.1%) for the last five months, decreasing to 2.9% in November 2015, down from 12.5% a year earlier, which “broadens monetary policy room towards expansion”, the statement said. “Supply-driven inflation has still been low and stable whilst demand-pull inflationary pressure is expected to be at low level.”

On the demand side, inflationary pressures are unwinding as Mongolia’s economic growth cools off. The central bank has phased out the monetary stimulus that kept the economy afloat in 2013 and 2014. Annual GDP growth slowed down to 7.8% in real terms in 2014, from 11.6% in 2013, according to figures from the National Statistical Office. The World Bank forecast the country’s GDP growth to decelerate further to 2.3% in 2015.

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