The Central Bank of Mongolia (Mongol Bank) increased the bank’s policy interest rate to 15 percent, the highest level in its history, on August 18, 2016. (Figure 1) The policy interest rate had been at 10.5 percent.
It has been explained that the increase was implemented to maintain the stability of the exchange rate of the Mongolian tugrug against the U.S. dollar.
Mongol Bank reported that there would be no adverse impact and the stability of the national currency had been ensured due to measures taken to stabilize savings and loan interest rates along with the policy interest rate change. In addition, the bank has strictly adhered to its policy to ensure balanced communication among banks while Mongolia faces economic pressure and commercial banks account for 95 percent of the nation’s financialmarket. According to a source at Mongol Bank, the rate of non-performing loans at Mongolian banks has been at the same level it was from 2008 to 2009 as of September 2016.
Seventeen commercial banks have operated in Mongolia, and Bank of China has studied opening a branch after opening a Representative Office in Ulaanbaatar in 2013. There has been confirmation that Mongolian banks will operate in the non-competitive financial sector.
The Central Bank of Mongolia will focus mainly on ensuring price stability and promoting balanced and sustained communication among commercial banks in the future. The bank has concentrated on policy to keep the inflation rate at a low level. The Mongolian inflation rate reached -0.6 percent in August 2016. Mongol Bank has announced that the bank will study the situation thoroughly and the Monetary Policy Council will hold discussions in October about changing the bank’s policy interest rate in the future.
Source: Infomongolia magazine, Mine &Money magazine
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Монгол эхийг энд дарж уншина уу