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Events
Mongolia's Central Bank Tightens Monetary Policy: Key Rate Increased to 12.5% www.open.kg
On August 12, 2026, the Central Bank of Mongolia (Bank of Mongolia) decided at an extraordinary meeting to raise the key interest rate by 50 basis points, increasing it from 12.0% to 12.5% per annum. This change marks the first step towards tightening monetary policy since March 2025, indicating the need to respond to the prevailing economic conditions, according to MongolianNews.
In addition, to address the excess liquidity in the banking system, the regulator increased the reserve requirement ratio on tugrik deposits by 0.5 percentage points, setting it at 14.5%.
Factors influencing the decision:
Increased inflationary pressure: As of July 2026, the annual inflation rate in the country reached 13%, exceeding the Central Bank's target range. Key factors contributing to rising prices include fluctuations in fuel and food prices, as well as government-regulated tariffs.
Risks and secondary effects: Core inflation shows moderate growth. Supply issues with petroleum products and shocks in the fuel market create risks of cost pass-through to final prices of goods and services.
Global challenges: Geopolitical tensions continue to affect global energy prices. In the context of high interest rates maintained by major central banks, the Bank of Mongolia is compelled to act to protect assets in the national currency.
Export sector: Rising global prices for coal and copper, along with increased physical exports, positively impact Mongolia's balance of payments and business activity.
Forecast and future monetary policy:
The committee expects that the seasonal increase in the supply of meat and vegetables in August will help slow food inflation. If fuel prices stabilize, annual inflation may return to the target range by mid-2027.
However, the balance of risks remains tilted towards inflationary factors, such as prolonged fuel shortages and imported inflation. The Bank of Mongolia emphasizes that the current decision aims to stabilize inflation expectations and monetary conditions. Future decisions on interest rates will depend on incoming macroeconomic data and changes in internal and external risks.
Published Date:2026-08-13
