- Decision
- Raise
- Rate change
- 100 bps
- discount rate
- 12%
The Board of the National Bank of the Kyrgyz Republic raised the discount (key) rate by 100 bp to 12.00 % to counter persistent inflationary pressures stemming from robust domestic demand and still-elevated external price risks. After being held at 11.00 % in January following a 100 bp hike in November 2025, the policy rate now stands at its highest in the current cycle. The interbank benchmark rate (BIR) continues to trade near the lower bound of the central bank’s corridor amid structural excess liquidity, which the authorities manage through active sterilisation operations. Annual inflation measured 9.6 % as of 13 February, above the 5–7 % medium-term target, while real GDP expanded 9.0 % y/y in January, propelled by services, construction and strong credit growth; bank deposits and loans surged 46.2 % and 48.8 % respectively in 2025, underscoring buoyant demand conditions. The domestic foreign-exchange market remains stable, with interventions limited to smoothing sharp exchange-rate swings. Globally, slowing food-price momentum contrasts with still-high inflation in key trading partners, and supply-chain risks persist amid geopolitical fragmentation. The central bank reiterated its balanced approach and signalled readiness to adjust policy further should risks to price stability intensify.
Rate evolution
The National Bank of the Kyrgyz Republic tightened policy by 275 basis points over the period, lifting the policy rate from 9.25% in July 2025 to 12.00% in February 2026, after an August pause and a January hold, and then kept it unchanged through August, most recently on August 24 with effect from August 25. Early decisions were driven by inflation above the 5-7% target, initially tied to seasonal food pressures and electricity tariff revisions but reinforced by strong growth, domestic demand and investment, while the Bank consistently flagged elevated external uncertainty from geopolitical tensions and volatile food prices.
It later stressed a shift in price pressures toward non-food goods and services, imported fuel and energy costs and secondary effects, and by February a stronger fiscal impulse, wider output gap and resilient consumer demand, which prompted tightening. In July, the Bank said restrictive monetary conditions remained necessary as inflation since the start of 2026 had reached 6.5%, or 11.3% in annual terms as of July 17, with food and fuel prices rising amid geopolitical tensions, volatile global commodity markets and risks to oil product supplies through the Strait of Hormuz. In August, it noted that consumer prices had risen 7.3% since the start of 2026 and annual inflation stood at 11.7% as of August 14, as higher fuel costs fed into transport and production expenses, global food price volatility lifted food prices, and domestic factors drove an 11.1% increase in service prices. With real gross domestic product growth at 11.1% in January-July, supported by construction investment and consumption, rising incomes and expanding credit, the Bank judged that restrictive conditions and active regulation of excess banking system liquidity remained necessary to limit secondary effects from external inflation and said it could adjust policy if risks to price stability emerge.