Policy interest raised to 11 percent
The policy interest rate has been reverted to 11 percent, announced Mongol Bank’s Monetary Policy Committee on Tuesday.
The decision to increase the policy interest rate back by one percentage point was finalized at an irregular meeting held by the committee on November 27.
The committee cut the policy interest rate by one percentage point on December 25, 2017 and by another percentage point on March 23, 2018 to stimulate economic recovery since the 2016 financial crisis.
By the end of October, the annual inflation rate stood at 6.3 percent, with the inflation rate in Ulaanbaatar rising to 6.8 percent.
Even though mineral prices are maintaining their value and the economy over-performed by accelerating 6.7 percent, unclear external conditions are a concern for the economy, reported the committee.
The committee pointed out a few factors affecting negatively on the balance of payment and causing tugrug depreciation. These factors were relatively high fiscal deficit approved for next year, US Federal Reserve raising interest rates, and China setting limits on coal imports. Mongol Bank explained that it decided to increase the policy interest rate in an effort to maintain current economic activity.
This decision is said to be consistent with the bank’s target for medium-term inflation rate, will likely increase tugrug exchange rate, and help maintain medium-term economic stability.
During the meeting, Mongol Bank approved a 28-day securities trade starting December 2018.