The National Bank of Tajikistan has now cut its rate by 200 basis points this year following a 125-point rate cut in January.
In 2016 and 2017 Tajikistan's central bank raised its rate by a total of 800 basis points - the last hike was in March 2017 - to curb inflation from a sharp depreciation of its somoni.
Like other former Soviet republics, Tajikistan was hit hard by Russia's economic crises as remittances and exports plunged, weakening the somoni and triggering stress in the banking system and the insolvency of two large banks as non-performing loans soared and banks had open foreign exchange positions and foreign exchange lending to borrowers.
But inflation has been declining steadily since hitting 9 percent in June 2017 and the central bank forecast inflation will continue to decline in the first half of 2018 and then remain within its target range of 7.0 percent, plus/minus 2 percentage points.
Inflation in Tajikistan - located west of China, north of Afghanistan and east of Uzbekistan - fell to 5.2 percent in February from 6.5 percent in January and 6.7 percent in December on lower prices of basic consumer goods, such as flour, rice, vegetable oil and vegetables.
Due to a more balanced monetary policy and limited pressure on inflation from the exchange rate, the central bank said core inflation was 1.9 percent.
The potential risks to inflation are mainly related to seasonal supply shocks, a possible fluctuation in the exchange rate along with external factors, such as the monetary policy of the U.S. Federal Reserve and the geopolitical situation, the central said.
The exchange rate of Tajikistan's somoni has been stable since May last year and was quoted at 8.82 to the U.S. dollar, unchanged this year but down 10.6 percent since the start of 2017.Tajikistan's Gross Domestic Product grew by an annual 7.1 percent in the fourth quarter of last year, up from 6.8 percent in the third quarter.
www.CentralBankNews.info
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