- Decision
- Raise
- Rate change
- 200 bps
- policy rate
- 12%
The Monetary Policy Committee of the Bank of Mongolia raised the policy rate by 200 bp to 12 percent at its 6–7 March 2025 meeting, citing inflation that climbed to 9.6 percent nationwide in January—well above the 5 percent ±2 pp target—and an upward-revised outlook driven by higher electricity tariffs, services prices, imported goods and robust wage-led demand. The move follows the Committee’s decision to leave the rate at 10 percent in January while lifting reserve requirements, marking a sharp tightening of the stance within two months. Alongside the hike, the central bank capped the debt-service-to-income ratio for new and restructured consumer loans at 50 percent and required that pension-secured borrowers retain income above the subsistence minimum, measures aimed at curbing fast consumer-credit growth that is adding to demand and financial-stability risks. The economy expanded by 4.9 percent in 2024 and is expected to gain further support in 2025 from a rebound in agriculture, rising copper output, fiscal expansion and large infrastructure projects, but inflation is projected to stay above the target range throughout the year. Authorities warn that domestic financing of forthcoming mega projects could strain the balance of payments and the exchange rate, while external headwinds—geopolitical tensions, uncertain U.S. trade and tax policy, and softer prospects for coal and iron-ore prices—could weaken export demand. The Committee said future actions will hinge on domestic and external developments, inflation dynamics and growth prospects.
Rate evolution
The Bank of Mongolia’s early decisions to keep the policy rate at 12 percent reflected inflation slowing on softer food and imported goods prices and past tightening, while mega-project financing, export revenues, the exchange-rate outlook and weather posed upside risks as growth moved from a slowdown to a recovery driven by agriculture, mining and large projects. By December, the Monetary Policy Committee still expected inflation within target in 2026, but said poor harvests, firm meat prices and projected wage increases had lifted the outlook, even as lower-than-feared tariff effects and stronger gold and copper prices improved external conditions.
In March 2026, it again held the policy rate at 12 percent as inflation fell to 6.5 percent near the midpoint of the target range, while warning that faster food prices, higher fuel and food costs, and geopolitical uncertainty linked to the Middle East conflict could intensify inflation. The Bank of Mongolia maintained the policy rate at 12 percent on June 23 and 24 as annual inflation reached 11.2 percent nationwide and 11.0 percent in Ulaanbaatar in May on supply-side pressures, while first-quarter growth accelerated to 7.9 percent on mining and transportation and most non-mining sectors remained weak.
On September 16 and 17, the Bank of Mongolia held the policy rate at 12.5 percent as annual inflation in August declined to 12.5 percent nationwide and 11.6 percent in Ulaanbaatar, supported by increased meat and vegetable supplies, while core inflation eased to 6.8 percent and first-half growth reached 7.7 percent on mining and transportation. It projected inflation would begin easing gradually from the second quarter of 2027 and approach the upper bound of the target range by year-end, but flagged risks from fuel-price pass-through, global food prices, fiscal spending, wage growth and budget decisions, while noting that high gold and copper prices had supported the terms of trade, foreign exchange reserves and the exchange rate.