The National Bank of the Kyrgyz Republic began raising its rate in July 2014 to curb inflationary pressures from the depreciating som currency and the rate cut is the first move by the central bank to roll back rate cuts totaling 500 basis points from July through January. Since February the central bank had maintained the policy rate at 11.0 percent.
Inflation in Kygyzstan, which borders Kazakhstan to the north and China to the east, eased to 7.9 percent in April and then to 6.4 percent by mid-May from 10.5 percent at the end of 2014, according to the central bank, which targets inflation of 5.0 to 7.0 percent inflation.
The kyrgyzstani som began depreciating in August 2014 and hit a 2015-low of 63.9 to the U.S. dollar in early April but since then it has bounced back. Today it was quoted at 58.4 to the dollar, steady from 58.9 at the start of the year.
The central bank said its economic growth was still subject to external factors, citing uncertainty among its main trade partners that is affecting it through trade and remittance channels.
High economic growth of 7.0 percent from January through April was mainly driven by an expansion of gold mining at the Kumtor mine. Excluding Kumtor, Gross Domestic Product expanded by an annual 3.7 percent.
The National Bank of the Kyrgyz Republic issued the following statement:
"On May 25, 2015 the Board of the National Bank of the Kyrgyz Republic decided to lower the monetary policy rate by 150 basis points, to 9.50 percent.
Inflation rate has been declining. At the same time, the economic growth is still subjected to the influence of external factors.
Economic situation in countries – main trade partners remains uncertain and keeps influencing on economic slowdown in our country through foreign trade and remittances channels.
As of the middle of May, the annual inflation has decreased to 6.4 percent, from 10.5 percent at the end of 2014. High economic growth rates in January-April of 2015 (7.0 percent) were mainly driven by the expansion of production at the “Kumtor” gold-mining company. Without “Kumtor”, the real GDP growth was 3.7 percent (in January-April of 2014 – 4.2 percent).
In view of foreign and domestic demand slowdown risks as well as of dynamics of inflationary developments, the National Bank of the Kyrgyz Republic shall continue to monitor the situation in country’s economy and take required monetary policy measures consistent with statutory mandate in order to stimulate economic growth. The monetary policy shall be aimed at achieving and maintaining inflation at the level of 5-7 percent in the medium term, which is determined by the Main directions of the monetary policy of the National Bank of the Kyrgyz Republic for a medium-term period.
The next meeting of the Board of the National Bank of the Kyrgyz Republic on the monetary policy rate scheduled for June 29, 2015. "