At its meeting on May 5, the Monetary Policy Committee (MPC) at the Bank of Mongolia (BoM) took a decision to cut the policy interest rate by 1.5% to fix at 10.5%. This is the second time for this year when the monetary policy interest rate was lowered.
The previous meeting of the Monetary Policy Committee took the decision on cutting monetary policy interest rate by 1 point to achieve 12%. Now the inflation rate has declined to 1.7% as of March 2016 which is lower than the target level for the last 9 months.
Zoljargal, the President of Mongol Bank
-Both demand-driven and supply-shock inflationary pressures are expected to be at low level throughout this year; therefore it shall positively affect maintaining low and stable inflation. The overall balance of payments is projected to have no deficit at the end of 2016, supported by a positive outlook for foreign direct investments in the medium-term.
However, it has been a mandatory measure and inevitable adjustment to cut budget expenditures in conjunction with the underperformance of revenues, and nullify budget deficits in order to achieve key objectives of macroeconomic policy framework “The New Equilibrium”.
Favorable changes and positive developments in macroeconomic external balance have further expanded monetary policy room towards continued easing.