Central bank lowers policy rate by one percentage point

Densmaa 2020-09-17 12:09

Economy

The Monetary Policy Committee of the Bank of Mongolia (BoM) has issued a decision to lower the policy rate by one percentage point bringing it to 8 percent and introduce long-term financing.

This decision targets to increase the number of loans to be issued from the banking sector to the real economic sector and create a condition to lower loan interest, in consideration of the current state of the economy and financial markets, future prospects, and uncertainties and risks in the external and internal environment. The decision and following actions are expected to encourage to meet the inflation target, slow down the economic fall and stimulate the recovery, noted G.Enkhtaivan, Vice President of BoM. Annual headline inflation fell down to 2.1 percent nationwide and 1.7 percent in Ulaanbaatar city as of August 2020. Inflation will increase slightly over the next months due to the base period, but is likely to remain at its current low level and not to exceed the target level in the coming years. Due to the COVID-19 pandemic, the country’s economy has shrunk by 9.7 percent in the first half of 2020, the sharpest plunge in the past 20 years. However, the economic downturn is anticipated to subside in the second half of this year and begin to recover next year due to monetary and financial policy actions and the recovery of the external environment. G.Enkhtaivan added, “The COVID-19 pandemic caused a sharp downturn in the global economic activity in the first half. From the second half, it has been seen unstable but shows a quite improvement, being affected by stock market prices, mineral prices, and trade activity. However, economic uncertainty continues as domestic and external economic prospect depends on the control of the virus spread. A step by step proper monetary and macroprudential policy measures being taken to mitigate the impact of the pandemic helps slow down the domestic economic downturn and maintain the stability of the banking sector. Even further, we will work to support the solvency of banks, households, and businesses, and prevent credit disruptions in the banking system.”