Central Bank of Mongolia Leaves Rates Steady

The central bank of Mongolia kept its key policy rate unchanged at 12% in June 2026, citing the current state of the economy, banking system, and financial markets, as well as domestic and external conditions and associated risks. Annual inflation has picked up in recent months, driven by rising fuel and food prices, reaching 11.2% in May. Looking ahead, increases in meat and fuel prices are expected to moderate gradually, with inflation projected to stabilise within the central bank’s 5% target range (±2 percentage points) over the medium term. However, upside risks to prices remain if supply-side pressures persist, including adverse seasonal conditions, animal diseases, and geopolitical uncertainties linked to the Middle East and the Russia-Ukraine conflict, particularly if spillovers prove stronger than expected. Policymakers said future policy decisions will depend on developments in inflation, supply-side factors, and both domestic and external economic conditions.

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.