Monetary policy rate to remain at 14 percent

Mongol Bank’s Monetary Policy Committee met on March 17, and voted to keep the monetary policy rate at 14 percent.

Last year, after the Mongolian People’s Party took control of the government, the monetary policy rate was raised from 11 percent to 15 percent, but was soon after lowered to 14 percent.

Officials at the central bank explained that the reason for raising the monetary policy rate was to preserve foreign currency reserves.

After announcing their decision to leave the monetary policy rate unchanged, the Monetary Policy Committee stated, “As of February 2017, according to the consumer price index, inflation has reached 2.1 percent at a national level and 1.4 percent in Ulaanbaatar.”

They also stated that even though inflation is expected to slowly rise, it won’t be allowed to go over target levels.

To counter the current inflation rate, the government exchanged Development Bank of Mongolia’s 580 million USD in Euro bonds for a new government-backed bond, the Khuraldai bond. In addition, the central bank extended the duration of the local currency swap line agreement made with the People’s Bank of China, and decreased the state’s burden for repaying short-term foreign loans.

Addressing recent developments, Mongol Bank released a statement that reads, “Even though positive developments have been made in economic and financial markets, the budget and [the nation’s] position within foreign markets still remains unclear.”

Mongol Bank believes that after Parliament amends the 2017 state budget and the International Monetary Fund’s Board of Directors approves Mongolia’s enrollment in an extended fund facility program, the central bank will be able to revisit the nation’s monetary policy.