Mongolia Keeps Rate Steady at 12%

The Bank of Mongolia kept its key policy rate unchanged at 12% at its December 2025 meeting. Policymakers noted that planned wage increases next year are expected to put upward pressure on inflation, while inflation is projected to enter and stabilize within the target range in 2026. However, the central bank highlighted several upside risks to the inflation outlook, including the financing of government projects, developments in export revenues and the exchange rate, as well as weather conditions and supply-driven price pressures. Annual inflation stood at 8.2% in November, remaining above target. The Bank of Mongolia aims to keep inflation within a 5% target band, plus or minus 2 percentage points, from 2027 onward. The central bank also noted that global and Chinese growth prospects have improved, as the impact of US tariffs has proven smaller than initially anticipated. Despite the improvement in external conditions, uncertainty remains elevated.

Mongolia’s central bank kept its benchmark interest rate at 12% for a second consecutive meeting, adopting a cautious stance amid steady macroeconomic conditions, a resilient banking sector, developments in financial markets, and domestic and global economic risks. Headline inflation rose to 8.8% in August, driven largely by higher prices for meat, vegetables, and flour. The central bank anticipates inflation to increase modestly over the next two to three months before gradually returning to its target range of 6% ± 2 percentage points by 2026. Economic growth in 2025 is expected to remain robust, with 5.6% expansion in the first half led by agriculture and the second half supported by copper production and large construction projects. Trade prospects have improved, with progress in international negotiations and US tariffs coming in below initial expectations.

Mongolia's central bank kept its benchmark rate at 12%, following a 200-bps hike in March, after assessing the macroeconomy, banking sector, markets, and domestic and global risks. Annual inflation eased to 8.3% in May from 8.6% in April, the lowest since November 2024. Despite earlier-than-expected easing, inflation is expected to stay above the central bank’s 6% ± 2 percentage points target this year. Economic growth slowed to 2.4% year-on-year in Q1 2025, down from 4.9% last quarter, missing expectations, and marking the weakest expansion since Q2 2022. The slowdown was driven by contractions in mining, transport revenues, and tax and trade sectors. External uncertainties from geopolitical tensions and trade policies continue to weigh on demand and commodity prices. The central bank is expected to maintain a cautious and flexible monetary policy, balancing inflation control with growth support amid ongoing risks.