Kyrgyzstan’s central bank lowered its discount rate by 25 basis points to 4.50 percent and forecast continued low inflation in the first half of 2019 before prices should accelerate by the end of the year.
The National Bank of the Kyrgyz Republic (NBKR), which has kept its rate steady since cutting it in May 2018, said monetary policy will continue to be stimulating to expand lending and economic activity and in the medium term inflation is not expected to exceed the target of 5.0 – 7.0 percent.
Kyrgyzstan’s inflation rate fell to 0.4 percent in January from 0.5 percent in the previous two months and turned negative by Feb. 15 as prices fell an annual 0.7 percent, NBKR said.
NBKR lowered its forecast for inflation to average around 3.0 percent this year, down from December’s forecast that inflation would be within the 5.0 -7.0 percent target this year.
In the event inflation accelerates, the central bank said it would consider the possibility of adjusting the current direction of monetary policy.
The central bank also said all sectors of the economy remain active, with gross domestic product growth of 6.4 percent in January and 1.9 percent when excluding the Kumtor gold mine. In 2018 Kyrgyzstan’s GDP grew 3.50 percent.
Inflow from remittances and rising wages continues to support domestic demand, the central bank said, adding net inflow rose 5.5 percent last year while wages rose 3.8 percent in real terms.
NBKR added the foreign exchange market is generally stable and is not presenting any significant risks.
The Kyrgyzstani som has been steady since November last year but has been firming in the last month and rose in response to the rate cut to trade at 69.65 to the U.S. dollar, up 0.3 percent this year.
Kyrgyzstan cuts rate 25 bps and lowers inflation forecast