Ulaanbaatar
Lowered policy rate to yield results next year
Economy
Ulaanbaatar /MONTSAME/ The Bank of Mongolia lowered the policy rate by 2 percent, down to 12 percent yesterday, on May 15. Accordingly, BoM held press conference later that day.
Director of the Monetary Policy Department of BoM B.Bayardavaa said “When we previously increased the policy rate, we have stated to lower the policy rate back once the economy stabilizes. The decision to lower policy rate was based on many factors. In particular, the policy rate eased room for a tight monetary policy. Also, some laws were approved to maintain stability in the budget and mid to long term loan policies. On the other hand, debt stress is easing in the balance of payment. In other words, positive results have been shown in the external economic state, since the last meeting. Particularly, the price of copper increased between USD 300 to 500, the Chinese economic growth reached 6.7 percent and Russian economy grew by 0.7 percent”.
By lowering the policy rate, the Government’s bond and deposit rates could be lowered as well. And once the deposit rate is lowered, it’s possible for interest rates to decrease. As a result, the inflation rate will be stable in the midterm. As for the long-term, an outlook was made, stating budget rate to be tightened and reduced down to 9.5 percent this year, 6 percent by next year and 5 percent by 2019. The effect of the decision will be shown in the market after 4 quarters through increased investment in non-mineral sectors. According to the BoM officials, the lowered rate will have a positive impact for the non-performing loans.
Director of the Monetary Policy Department of BoM B.Bayardavaa said “When we previously increased the policy rate, we have stated to lower the policy rate back once the economy stabilizes. The decision to lower policy rate was based on many factors. In particular, the policy rate eased room for a tight monetary policy. Also, some laws were approved to maintain stability in the budget and mid to long term loan policies. On the other hand, debt stress is easing in the balance of payment. In other words, positive results have been shown in the external economic state, since the last meeting. Particularly, the price of copper increased between USD 300 to 500, the Chinese economic growth reached 6.7 percent and Russian economy grew by 0.7 percent”.
By lowering the policy rate, the Government’s bond and deposit rates could be lowered as well. And once the deposit rate is lowered, it’s possible for interest rates to decrease. As a result, the inflation rate will be stable in the midterm. As for the long-term, an outlook was made, stating budget rate to be tightened and reduced down to 9.5 percent this year, 6 percent by next year and 5 percent by 2019. The effect of the decision will be shown in the market after 4 quarters through increased investment in non-mineral sectors. According to the BoM officials, the lowered rate will have a positive impact for the non-performing loans.
B.Tugsbilig
