The central bank of Mongolia cut its policy rate by 75 basis basis points to 12.5 percent due to a decline in demand-pull and supply-driving inflationary pressures but said it was cautious about easing considering uncertainties in foreign trading and foreign investments.
The Bank of Mongolia, which raised its rate by 100 basis points in April 2012, said the rate cut should help provide stable monetary and credit growth, ensure smooth functioning of the financial system and promote economic activity.
"Although macroeconomic outlook enables policy rate reduction, the MPC acknowledges cautious easing of monetary policy, considering uncertainties in foreign trade and foreign investment environment," the central bank said in a statement following a meeting of its monetary policy committee on Jan. 25.
Mongolia's inflation rate eased to 14 percent in December from 14.4 percent in November. The central bank targets inflation of less than 10.0 percent. It 2013 policy guidelines call for inflation of below 8 percent at the end of 2013 and in the range of 5-7 percent in 2014-2015.