Monetary Policy Statement - 2025-03

On maintaining the policy interest rate and amending the pension loan regulations

No.: 2025/03

Date: June 13, 2025

At the regular meeting of the Monetary Policy Committee of the Bank of Mongolia on June 12 and 13, 2025, taking into account the current state of the economy, banking, and financial markets, the domestic and external environment, and risks, it was decided to:

Maintain the policy interest rate at 12 percent;

It was decided to set the maximum debt-to-income ratio at 50 percent for new loans issued by the bank and for changes to the terms of newly issued loans secured by pension and benefit income, similar to other consumer loans.

Annual inflation has gradually slowed down, reaching 8.3 percent nationwide in May 2025 and 9.4 percent in Ulaanbaatar. This slowdown in inflation was mainly due to the slowdown in the growth of prices of staple foods such as meat and flour, as well as imported goods. Although inflation has started to slow down earlier than expected, inflation is still expected to be higher than the Central Bank's target this year due to the impact of price increases in some state-regulated goods and services. The future outlook for inflation will depend on the projects implemented by the Government, its financing, export earnings and exchange rate trends, and changes in food prices due to weather and supply.

Economic growth slowed to 2.4 percent in the first quarter of 2025, below expectations. The slowdown was driven by a decline in key mineral extraction, a sharp decline in transportation revenues, and a contraction in tax and trade production. This year, the agricultural sector is expected to recover from the dzud crisis, copper concentrate production will increase, and new projects will begin construction.

In terms of the external environment, geopolitical conditions and uncertainty regarding trade policies of countries are increasing, negatively affecting foreign demand and commodity prices. However, the relatively high prices of gold and copper have a positive impact on our country's trade conditions.

Pension income-secured loans have increased rapidly in recent years, and the debt burden and financial burden on pension borrowers have increased, and there is a risk that they will continue to increase. Therefore, there is a need to regulate pension loans at an appropriate level.

The above policy decision is consistent with the Central Bank's target of stabilizing inflation expectations to around 6 percent in a +/-2 percentage point range in 2026 and to 5 percent in a +/-2 percentage point range from 2027, and is aimed at supporting macroeconomic and financial sector stability in the medium term.

The Monetary Policy Committee will take the next policy step on a case-by-case basis, depending on the changes in the external and domestic economic environment and how the inflation and economic outlook evolve.

The summary minutes of the Monetary Policy Committee meeting will be posted on the Bank of Mongolia's website in two weeks.

Source: mongolbank.mn