Mongolia Interest Rate

Mongolia's central bank cut the policy rate by 100bps to reach 10% in its September meeting, after keeping it unchanged in July, and raised the reserve requirement on domestic currency liabilities by 2 percentage points to 10% to address increasing credit growth in the banking sector, which poses financial risks. The Monetary Policy Committee (MPC) also expanded the policy rate corridor by 2 percentage points around the new rate and annulled previous exclusions on reserve requirements. As of August 2024, annual inflation was 6.5% nationwide and 6.2% in Ulaanbaatar, driven by rising prices for domestic goods and services. While inflation is expected to stabilize within target ranges, proposed budget amendments could increase domestic demand and inflation risks. As for economic growth, it reached 5.6% in the first half of 2024, supported by mining, transportation, and higher consumption.

Mongolia's central bank maintained its benchmark interest rate at 11%, following a 100 bps cut in an exceptional meeting on May 13th. Annual inflation dropped to 5.7% in May 2024, aided by tighter monetary policy, a stable exchange rate, and lower domestic food prices, keeping it within the target range. Despite robust economic growth of 7.8% in Q1 2024, concerns about a severe drought affecting agriculture and geopolitical risks influenced the decision to hold the interest rate steady. Additionally, high international interest rates and the need to manage financial sector risks from rising consumer credit led to tighter consumer loan restrictions, while supporting certain credit products. The monetary policy committee stated that it will adjust its policy based on shifts in the external and internal economic environment, as well as changes in inflation and the overall economic situation.

Mongolia’s central bank cut its key interest rate by 100 bps to 12% during its March 2024 meeting, marking the first interest rate cut since December 2022. The move came after the MPC anticipated a gradual decline in inflation resulting from the implemented monetary policy measures, lower inflation among trade partners and the strengthening of MNT exchange rate which appreciated by 2% since the beginning of the year. Inflation in February stood at 7% and a further decline would place it within the target range of the central bank. Policymakers also decided to authorize commercial banks to restructure and extend the loan maturity term for herders experiencing difficulties in their loan repayments, as severe winter and spring weather in rural areas will probably cause a contraction in the agriculture sector.