Central Bank of Mongolia Lowers Policy Rate by One Percentage Point

Ulaanbaatar, May 15, 2024 /MONTSAME/. The Monetary Policy Committee (MPC) of the Central Bank of Mongolia held its unscheduled meeting on May 13, 2024. Considering the current state of the economy, banking, and financial markets, as well as the outlook for the external and internal economic environment, the MPC decided to reduce the policy rate by one percentage point to 11 percent.

As of April 2024, annual inflation reached 6.4 percent nationwide and 6.1 percent in Ulaanbaatar city. The monetary policy measures implemented by the Central Bank of Mongolia since 2022 have been effective in curbing and stabilizing inflation. Moreover, the continued deceleration of inflation for imported goods and products, coupled with stabilizing price increases for main domestic food products, has contributed to a decline in inflation. Although there remains a potential risk of increasing inflation stemming from wage and pension increases, as well as fiscal and quasi-fiscal activities, their impact has been lower than expected, resulting in a downward adjustment in the near-term inflation forecast. 

Robust foreign demand and substantial export volumes have positively impacted foreign currency inflows and the balance of payments. Due to severe weather conditions, known as dzud, livestock losses have significantly increased during the winter months, negatively affecting both agricultural production and economic growth. As a result, the Monetary Policy Committee of the Central Bank of Mongolia decided to reduce the policy rate by one percentage point to support stable economic growth in the medium term and ensure the external and internal balance of the economy. This policy decision is consistent with the objective of stabilizing inflation at the target level and ensuring macroeconomic stability in the medium term. 

Subsequent policy actions will be contingent upon changes in the external and internal economic environment and the inflation outlook.