National Bank of Kyrgyzstan holds policy rate at 13%

BISHKEK. May 31 (Interfax) - The National Bank of Kyrgyzstan's management board has decided to hold the key policy rate at 13% per annum, the regulator said in a statement.

The external economic environment, which has a direct and indirect impact on Kazakhstan's economy, remains uncertain and volatility in external financial markets persists. Although global food and oil markets are demonstrating a gradual downward price trend, inflation expectations remain high in most countries. However a gradual slowdown for inflation in the region is an upside, the National Bank said.

GDP grew 4.4% in January-April. Growth was driven by positive results for the main sectors of the economy, chiefly the services sector. Coordinated fiscal and monetary policy actions are among the factors that will contribute to steady inflation in the medium term. Domestic demand is supported by strong growth in real wages, as well as the growing consumer lending.

Consumer prices in Kyrgyzstan rose 4.2% between January 1 and May 19, 2023. Annual inflation was 11.2%. "The current inflation is mainly due to adjustment of certain administrative prices (tariffs), as well as the stabilization of the price situation in the world food markets. The situation in the money and foreign exchange markets remains relatively stable thanks to the timely measures taken by the National Bank. Maintaining current monetary conditions will keep deposits in the national currency appealing and encourage households to save," the National Bank said.

Pro-inflationary factors persist in the short term. The anticipated inflationary path, along with external conditions, will be influenced by internal factors, notably a gradual expansion of domestic demand, as well as an increase in a number of tariffs and excises. At the same time, upbeat expectations for world food inflation will constrain growth of domestic prices.

Given the conditions that have emerged, the National Bank decided to hold the discount rate. The regulator said its polity, as before, is to lower inflation to the target level of 5-7% in the medium term. The National Bank could make adjustments to monetary policy in the event of any risks.

The next meeting of the Board of the National Bank on policy rate will be held on July 31.

The rate has been 13% since November 2022, when it was lowered from 14%.