Ulaanbaatar
Bank of Mongolia decides to keep policy rate unchanged
Economy
Ulaanbaatar/MONTSAME/. At the scheduled meeting held
on March 24, 2021, the Monetary Policy Committee (MPC) of the Bank of Mongolia
took into consideration the current state and outlook of the economy and
financial markets, as well as the uncertainties and risks inherent in the
domestic and external environments, and decided to:
- Keep the policy rate unchanged at 6 percent;
- Issue up to MNT 350.0 billion under the long-term repo
financing in the second quarter of 2021. The financing has been expanded to involve
businesses in processing, service sectors, and trade businesses with more than
200 employees.
Annual headline inflation stands at 2.6 percent nationwide
and 2.0 percent in Ulaanbaatar city as of February 2021. The impact of the
demand factor on inflation is seen to have a gradual increase in the coming
quarters as the economic activity intensifies, while supply-side inflation is expected
to increase further owing to the prices of fuels and refined coal. Inflation is
projected to remain unchanged at the target level in the medium-term, but it may
change due to the spread of coronavirus and vaccination activity.
If vaccination continues successfully, economic activity is
expected to increase, with businesses returning to normalcy. In the first two
months of 2021, the export grew by 73 percent. The processing sector showed an
increase of 66 percent and 37 percent in January and February respectively. In
addition, Moody's changed the outlook of Mongolia's issuer ratings to stable
from negative in connection with increased official foreign currency reserves
and reduced pressures of short-term external debt as well as expected recovery
of the economy.
The step-by-step implementation of monetary and macroprudential policy measures and the adoption of new financing instruments by the central bank directed at mitigating the impact of the COVID-19 pandemic contribute to decelerating the pace of domestic economic downturns, facilitating recovery, and ensuring the stability of the banking sector.
If inflation exceeds the target level, the MPC will make policy adjustments.
