CEIC Data Blog

Tightening Monetary Policy in Mongolia

 

CEIC Macro Watch: In two consecutive months the Central Bank of Mongolia (CBM) took serious measures to tighten the monetary policy and tame inflation. On February 23rd, the CBM Board of Directors announced a stark increase of the reserves requirement ratio to 9%, almost doubling the previous value of 5%. About a month later, the policy rate was increased to 11.5%, the second increase in the last 12 months.

Key Components of Monetary Policy in Mongolia
Mongolia Monetary Policy
Chart provided by: CEIC Data

Inflation is the main concern in the Mongolian economy. Double-digit annual CPI growth has been the rule in the past year, despite government efforts to contain supply-side inflation by improving the conditions of the food supply in the country in light of the international inflationary pressures on the world market. Most recent surges in inflation seem to be caused by increased domestic demand, resulting from budget expansion, distribution of allowances for citizens, and development of the mining industry. Simultaneously money supply and outstanding loans have been growing at increasing annual rates, reaching 67% and 35%, respectively, in March 2011.

The CBM estimated that inflation would have reached 15-20% in December 2011 if strict monetary policy measures had not been implemented right away. Indeed, the inflation outlook has noticeably improved in the past couple of months. Although outstanding loans and money supply growth rates (M2) have remained high, annual CPI decreased to 8% in March and even fell to 5.5% in April 2011.

Discuss this post and many other topics in our LinkedIn Group (you must be a LinkedIn member to participate). Request a Free Trial Subscription.

By Dobromira Vasileva in Bulgaria – CEIC Analyst

Did you enjoy this post? Why not leave a comment below and continue the conversation, or subscribe to my feed and get articles like this delivered automatically to your feed reader.

Comments

No comments yet.

Leave a comment

(required)

(required)