The central bank of the Kyrgyz Republic cut its policy rate by a further 50 basis points to 5.50 percent in light of low inflation and said it intends to continue with its stimulative monetary policy in the absence of external shocks to help neutralize deflationary forces.
The National Bank of the Kyrgyz Republic (NBKR) has now cut its rate by 450 basis points this year following cuts of 200 points in both March and May.
Inflation in Kyrgyzstan fell to minus 0.2 percent in October from 0.3 percent in September, just above the record low of minus 0.60 percent seen in April this year.
The NBKR said it expects inflation to be close to zero at the end of this year with the low inflation environment continuing in coming months but in the medium term inflation is still expected to return to its target range of 5-7 percent.
Kyrgyzstan's economy is continuing to improve, with economic activity turning positive in the third quarter and real Gross Domestic Product up by 2.7 percent in the first 10 months, the bank said.
Excluding output from the Kumtor gold mine, the country's economy grew by 3.3 percent as domestic consumption recovered, it added.
Domestic financial markets remain stable, the central bank said, adding that the exchange rate of the som had appreciated by 9.0 percent from the beginning of the year to Nov. 28, with intervention in the foreign exchange market only carried out to smooth short-term fluctuations.
The som, which fell swiftly from early 2014 until December 2015, has firmed since February this year and was trading at 69.0 to the U.S. dollar today, up from 75.9 at the start of the year.
Last month the International Monetary Fund said the NBKR had “done a good job steering the economy through the recent period of volatility” and could relax its policy given the decline in inflation while still remaining vigilant for signs of fiscal and exchange rate pressures.