Monday, February 27, 2017

Kyrgyzstan holds rate as inflation seen rising to target

    The central bank of the Kyrgyz Republic left its benchmark discount rate at 5.0 percent, saying the current level will help consolidate the economic recovery and keep the risk of inflation low.
     In December 2016, when the National Bank of the Kyrgyz Republic (NBKR) last cut its rate as part of an 500-basi-point easing campaign, the central bank said it intended to continue with rate cuts as inflation was expected to fall to zero in coming months.
    But today the NBKR said inflation was expected to approach its target range of 5-7 percent this year due to signs of a recovery in domestic consumption and higher international commodity prices.
    Inflation in the Kyrgyz Republic, south of Kazakhstan and east of China, accelerated to a positive 0.5 percent in January from a fall of 0.5 percent in December and rose further to 1.2 percent as of Feb. 17 as food prices have moved into positive territory as domestic demand improves.
    This is helping overall economic activity, with a positive output in agriculture and moderate growth in tradeable sector pushing up growth to 7.9 percent in January, the bank said.
    Excluding output from the Kumtor gold mine, the growth rate was 5.0 percent, it added.
    Earlier this month the International Monetary Fund noted that Kyrgyzstan's economic growth accelerated towards the end of last year, reaching 3.8 percent with 0.5 percent deflation, partly due to an exchange rate appreciation of about 9 percent.
     In December the IMF forecast 2017 economic growth of 2.3 percent and 2.9 percent in 2018 after estimated growth of 2.6 percent in 2016.
     The exchange rate of the som fell swiftly from early 2014 until December 2015 but from February 2016 to late July it rose. Since November last year it has been largely stable, helped by central bank intervention to smooth out fluctuations, and was trading at 69.12 to the U.S. dollar today, largely unchanged from 69.2 at the start of the year.


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