The Bank of Mongolia (BoM)’s Monetary Policy Committee is scheduled to meet earlier this month to discuss whether to cut or leave the policy rate untouched at 11 percent as it did consecutively in the last two years. The inflation rate, which plays an important role in the monetary decision, stood at 5.6 percent in Mongolia, nearing around BoM’s target level. Central banks around the world have been introducing their intention to implement loose monetary policy since the lethal virus COVID-19 outbreak spread. A loose monetary policy occurs to decrease unemployment and spur economic growth when it slows. In 2016, the central bank of Mongolia increased the policy rate to 15 percent, in an effort of halting the devaluation of tugrik at the time. It has been decreasing the rate since then to the current level. “Encouraging the economy through fiscal policy to at least decrease budget deficit is more efficient than focusing on the monetary policy. There is no guarantee that the cut policy rate will benefit entities. On the contrary, it may raise consumer loans, triggering the debt amount to increase further,” said Economist Dulguun Batbold. The 2020 Budget deficit of Mongolia equals 5 percent of the GDP or MNT two trillion. According to the economist, decreasing the policy interest rate rises the loan sources. Therefore, the amount of money the central bank spent in securities may be reduced and the money gets into circulation to stimulate the business environment.

Published Date:2020-03-04