Monday, November 23, 2020

Mongolia cuts rate 4th time in 2020 as curfew imposed

     Mongolia's central bank slashed its policy rate for the fourth time this year and cut its reserve requirement at an extraordinary meeting of its monetary policy committee, saying this was to reduce the impact on the economy and the financial sector during the COVID-19 pandemic and ease the financial difficulties faced by its citizens, businesses and financial institutions.
     The Central Bank of Mongolia (Mongolbank) cut its policy rate by another 200 basis points to 6.0 percent and has now cut it by 500 points this year following earlier cuts in March, April and September.
     The central bank also cut its reserve requirement on banks' domestic deposits by another 250 basis points to 6.0 percent and has now lowered it by 450 points this year following an earlier cut in March.
     In addition, Mongolbank said in a statement it would extend the period for restructuring consumer loans that are in arrears until July 1, 2021 and adopted a package of long-term refinancing instruments to support small and medium-sized enterprises and non-mining exports.
     The extraordinary meeting of the bank's MPC comes after the government announced a full curfew in Mongolia's capital Ulaanbaatar earlier this month after a truck drive tested positive for the virus, according to media reports.
     Mongolia's inflation rate rose to 2.4 percent in October from 1.7 percent in September and the central bank said it expects inflation to rise slightly in coming months due to the comparison with last year but it will still not exceed its target level.
     The bank's target for 2021 is to stabilize inflation around 6.0 percent, plus/minus 2 percentage points, down from the 2020 target of 8.0 percent, plus/minus 2 percentage points.
     Mongolia's economy contracted by 9.7 percent in the first half of this year but the rate of contraction slowed to 3.1 percent in the third quarter, the bank said.
     Mongolbank added it would continue to take appropriate measures to support the liquidity of households and business, and prevent credit disruptions in the banking system.
      Local press later said the central bank had downgraded its economic forecast for the economy to contract by 5.4 percent this year from an earlier forecast of a 2-4 percent contraction.


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