Kyrgyzstan's central bank raised its key rate, the discount rate, by 75 basis points to 5.0 percent, saying higher food prices are continuing to exert upward pressure on inflation in the medium term.
It is the first change in rates by National Bank of the Kyrgyz Republic (NBKR) since May 2019 when paused in its easing cycle after 7 rate cuts starting in March 2016.
Between March 2016 and May 2019 NBKR cut its by a total of 575 basis points but since then inflation has accelerated.
In January consumer price in the Kyrgyz Republic rose for the 10th consecutive month to 3.2 percent and the central bank expects inflation to approach the lower boundary of its target of 5.0 to 7.0 percent in the second quarter.
By December this year, the central bank expects inflation to be about 5.0 percent and to average 4.6 percent in 2020.
NBKR is in the process of transitioning to an inflation targeting monetary policy framework to ensure price stability as the basis for long-term economic growth.
External conditions, especially commodity prices, are the main factors affecting inflation in Kyrgyzstan.
In its monetary policy guidelines for 2020, NBKR said it would be guided by a conservative approach in setting the discount rate to ensure price stability.
The exchange rate of the Kyrgyzstani som has been stable since November 2018, trading around 69.8 to the U.S. dollar.
www.CentralBankNews.info
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