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Mongolia Cuts Rates for First Time Since 2009 to Support Growth

Mongolia’s central bank cut interest rates for the first time since 2009 after determining that the outlook for inflation is benign and deciding to “cautiously” ease policy, its chief economist said.

The Bank of Mongolia reduced its policy rate to 12.5 percent from the previous 13.25 percent effective yesterday, according to a table on the monetary authority’s website and confirmed by chief economist Sandagdorj Bold. The central bank is confident it will be able to achieve its 8 percent inflation target for this year, Bold said in a telephone interview.

Mongolia’s gross domestic product growth moderated to 12.3 percent last year from a record 17.3 percent in 2011 after the price of coal, the biggest export, fell. Slower growth in China, which buys 92 percent of Mongolian exports, also reduced demand.

Inflationary pressure has eased as a result of fiscal limits adopted by the government that have resulted in “more disciplined” spending, Bold said.

Programs by the central bank to ensure the stability of food, fuel, housing and transportation costs have also helped, he said. Those efforts included providing loans to importers of fuel, he said.

Mongolia’s central bank at the end of last year gave the country’s fuel importers 83 billion tugrik ($59.7 million) of loans after the companies said they may have to increase gasoline prices, news website News.mn reported this month.

The nation’s economy has been spurred by a mining boom and influx of capital to fund projects such as the $6 billion Oyu Tolgoi copper and gold mine operated by Rio Tinto Group.

Mongolia exported 20.9 million tons of coal last year, down from 21.3 million in 2011, according to the National Statistics Office. The value of the exported coal in 2012 was $1.9 billion, compared with $2.27 billion in 2011, according to the agency.

To contact Bloomberg News staff for this story: John Liu in Beijing at jliu42@bloomberg.net

To contact the editor responsible for this story: John Liu at jliu42@bloomberg.net

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