The Board of the National Bank of Kyrgyzstan decided to raise the discount rate (key rate) by 50 basis points to 5.5 percent. The change happened for the first time for 12 months.
The National Bank of the Kyrgyz Republic notes that development of the world economy remains heterogeneous amid the impact of consequences of the COVID-19 pandemic. International trade shows a decline in volumes. At the same time, the ambiguous situation persists in the world commodity markets. All these factors continue to exert a constraining effect on both the growth of the world economy and economic activity in Kyrgyzstan.
«The country’s economy is recovering at a moderate pace. Decline in production volumes persists in all major sectors of the economy. Domestic demand remains weak. However, one of the factors of its recovery is the positive dynamics of the inflow of remittances to the republic,» the message says.
The interbank money market is characterized by continued positive trends.
Short-term rates in this market were mainly formed close to the key rate within the interest rate corridor established by the National Bank. Participants become more active in all segments of the money market. Presence of a high level of excess liquidity in the banking system, accumulated during 2020 against the background of changes in the structure of fiscal operations, causes carrying out of sterilization operations in significant volumes by the financial regulator to minimize possible inflationary risks.
The domestic foreign exchange market is relatively stable. Against the background of the influence of external economic conditions, there was an increase in demand for foreign currency in some periods. The National Bank participates in the foreign exchange market to smooth out sharp fluctuations in the exchange rate.
A gradual recovery of the economies of trading partner countries is expected.National Bank
«This will help to increase economic activity in the republic to meet external demand in the medium term. At the same time, the rise in prices on the world commodity and raw material markets determines the continued rise in consumer prices in the Kyrgyz Republic in the near future. Taking into account the prerequisites for development of the external environment and internal economic conditions, the National Bank of the Kyrgyz Republic decided to raise the discount rate to 5.5 percent. In case of any risks, the National Bank does not exclude the possibility of making additional adjustments to the ongoing monetary policy,» the National Bank said.
The next meeting of the Board of the National Bank on the size of the discount rate will be held on April 26, 2021.