Ulaanbaatar
Central bank lowers policy rate by one percentage point
Economy
Ulaanbaatar/MONTSAME/. 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 repo financing, reported
the authorities of the BoM at the press conference on September 14.
This decision targets to increase the amount of loans to be issued from banking sector to 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 shrank 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 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 domestic
economic downturn and maintain the stability of banking sector. Even further, we
will work to support the solvency of banks, households and businesses, and
prevent credit disruptions in the banking system.”
