Mongolia cuts key rate in bid to stimulate economy
Mongolia’s central bank cut its policy interest rate by one percentage point to 10 percent, the second reduction in three months.
Mongolia’s central bank cut its policy interest rate by one percentage point to 10 percent, the second reduction in three months as it seeks to stimulate an economy recovering from a 2016 financial crisis. It also reduced the reserve requirement ratio for commercial banks to 10.5 percent of tugrik deposits, from 12 percent. The policy key was also cut by one percentage point. B. Bayardavaa, director of the Bank of Mongolia’s monetary policy department, said that as inflation was below its target level, the central bank had decided to cut the benchmark again. In February, the annual inflation rate was 6.9 percent. The target for this year is 8 percent. “Although inflation is slowly increasing due to the economic recovery and rising demand, the yearly inflation rate is likely to stay at the targeted level,” the central bank said in a statement. Mongolia has some of the world’s highest interest rates, averaging 19.4 percent in January, according to the central bank. The high rates have reduced economic activity and hurt small businesses, analysts say. Lawmakers have been trying to impose an interest rate cap on banks amid fears that high rates are holding back growth. A collapse in its tugrik currency in the summer of 2016 forced the central bank to hike the benchmark rate to 15 percent and forced Mongolia to turn to the International Monetary Fund for assistance. Mongolia agreed to a $5.5 billion economic bailout from the IMF last year as part of its efforts to relieve debt pressures and stabilize the currency. The IMF said last month Mongolia’s economy is projected to grow 5 percent in 2018 and 6.3 percent next year, helped by foreign coal sales and improved domestic demand. Aspire to dual rail play to underwrite Mongolian coal.
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