Monetary policy to remain strict
The Central Bank said on December 25 that there would be no change in the monetary policy as its priority was to keep inflation in a single digit. The Directors’ Council met on December 23 and decided to watch how the payment of monthly allowances of MNT21,000 to all affected the economy and on how the scheduled budget expenses are finally spent.
Economists have criticized the 2011 budget as the worst in Mongolian history and both the International Monetary Fund and the World Bank have publicly warned of the almost certain negative influence on the economy of more social welfare handouts. However, the MPs had their own populist compulsions and the Mongol Bank thinks it needs a strict monetary policy to counter the likely impact of the budget provisions. It plans to keep the policy rate at 11% even though business, especially in the construction sector, has been clamoring for easier credit.
The inflow of USD is increasing and has led to the MNT gaining in strength. Foreign currency reserve has reached USD2 billion and the MNT has gained 14%, according to the Mongol Bank which is taking steps that the USD does not fall any more.
Economists have criticized the 2011 budget as the worst in Mongolian history and both the International Monetary Fund and the World Bank have publicly warned of the almost certain negative influence on the economy of more social welfare handouts. However, the MPs had their own populist compulsions and the Mongol Bank thinks it needs a strict monetary policy to counter the likely impact of the budget provisions. It plans to keep the policy rate at 11% even though business, especially in the construction sector, has been clamoring for easier credit.
The inflow of USD is increasing and has led to the MNT gaining in strength. Foreign currency reserve has reached USD2 billion and the MNT has gained 14%, according to the Mongol Bank which is taking steps that the USD does not fall any more.
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