National Bank maintains its rate at 4.75% - what is the reason?

Bishkek, Dec. 25, 2018. /Kabar/. The National Bank of Kyrgyzstan maintained its rate at 4.75%, Chairman of the National Bank of the Kyrgyz Republic Tolkunbek Abdygulov told at a press conference at the Kabar News Agency.

He noted that the decision of the Board of the National Bank was due to the fact that currently the inflation risks are balanced and are within the expectations of the National Bank.

“Taking into account the updated data, the estimates for inflation for the year were revised downwards: inflation in December 2018 / December 2017 will be at about 1.0 percent; in the second half of 2019, inflation will reach the target medium-term monetary policy benchmark of 5-7% in the absence of external and internal shocks. Since March of this year, low inflation has continued to be observed in Kyrgyzstan. Low prices for food products remain the main factor in the emerging dynamics of inflation. The increase in prices for non-food products is gradually slowing down. In December (by the 14th), the annual inflation rate had reached 0.3%,” he said.

The head of the National Bank said that domestic demand is driven by steady growth in real wages and positive dynamics of remittance inflows into the country.

He said that economic activity in the main sectors of the economy remains. Economic growth in January-November 2018 was 3.1%, excluding Kumtor data - 3.2%. The development of the Kyrgyz economy in the medium term will be significantly influenced by the economic situation in the countries-trading partners related to geopolitical uncertainty and prospects for global commodity markets.

“Short-term money market rates continue to be within the interest rate collar set by the National Bank, and are gradually approaching the discount rate. The increase in excess liquidity in the banking system in December led to a decrease in activity in the interbank credit market. In this regard, the National Bank continued to conduct operations to withdraw excess liquidity. The ongoing fiscal consolidation had a positive effect on the level of liquidity in the banking sector and does not cause inflation risks. Maintaining a soft monetary environment continues to support the expansion of the loan portfolio and the increase in the deposit base of commercial banks,” Abdygulov added.