The Board of the National Bank decided to increase the discount rate (key rate) by 1 percent — up to 7.5 percent. Website of the bank says.
The global economy is recovering from the effects of the pandemic at a faster pace. This is facilitated by the incentive measures of state support and easing of quarantine restrictions against the background of the ongoing mass vaccination of the population. Accelerated rates of recovery of business activity in countries — trading partners also contribute to the restoration of trade and economic relations in Kyrgyzstan.
Uncertainty remains high regarding the development of both global and regional economies, given the risks of new strains of COVID-19.
There is also a recovery in economic activity in Kyrgyzstan. At the same time, the reduction in the volume of production in industry and construction limits its full scale. Domestic consumption remains relatively weak and is supported by the positive dynamics of the inflow of remittances to the country. In January — May 2021, the net inflow of remittances from individuals increased by $ 45.3 percent, amounting to $ 778.1 million.
«Monetary conditions in general have not undergone significant changes. Short-term money market rates tended to grow and continued to fluctuate within the interest rate collar set by the National Bank. Money market participants’ activity increased in the short segment, mainly in open market operations. The banking system continued to build up the level of excess liquidity. Under these conditions, in order to limit inflationary pressure in the country, the National Bank continued to withdraw excess liquidity,» the statement says.
The domestic foreign exchange market remains relatively stable. The volume of gross international reserves reached $ 2.7 billion, which covers about six months of imports.
The National Bank notes that the recovery of the global economy largely depends on the spread of new more dangerous strains of COVID-19 and, as a result, the introduction of new restrictive measures, as well as the scale of vaccination of the population in the world. An ambiguous situation persists on the external commodity markets due to unfavorable weather conditions in the countries producing food products. Against this background, there is an increase in world prices for certain types of food. These factors continue to create inflationary risks in Kyrgyzstan in the medium term.
Taking into account the prerequisites for the development of the external environment and internal economic conditions, the National Bank decided to raise the discount rate. In case of any risks, the National Bank of the Kyrgyz Republic does not exclude the possibility of making additional adjustments to the monetary policy being pursued.
The next meeting of the Board of the National Bank on the discount rate issue will be held on August 30, 2021.
