Kyrgyzstan maintains rate, inflation seen around target

    Kyrgyzstan’s central bank left its benchmark discount rate at 5.0 percent, confirming that it still expects inflation to be close to its target of 5-7 percent by the end of this year with the current level of the discount rate helping stimulate the economy.
    The National Bank of the Kyrgyz Republic (NBKR) has maintained its rate since December 2016 when it last cut it as part of a 500-basis-point easing cycle that began in March 2016.
     Kyrgyzstan’s inflation rate was estimated by the central bank at 3.7 percent in May, down from 3.8 percent in April but up from 2.8 percent in March.
     Between September and December last year inflation was negative and the NBKR does not expect inflation to exceed its target range in the medium term.
     Higher prices are supported by a recovery in domestic consumption, remittances from workers abroad and higher external demand, the bank said.
     Kyrgyzstan’s economy is growing, with Gross Domestic Product up by an annual 7.7 percent in the January-April period, up from 3.8 percent in the fourth quarter of last year. Excluding output from the Kumtor gold mine, GDP was up 4.0 percent.
     Last month the International Monetary Fund forecast 3.5 percent growth this year as external and internal demand continue to improve.
     The domestic foreign exchange market remains stable, the central bank said, adding the tendency of the som to strengthen is continuing, with the exchange rate this year up 1.9 percent as of May 26.
     During the month of May, the central bank said it didn’t intervene in the foreign exchange market.
     Between March 18 and April 27 the som rose 3.1 percent to 67.2 per dollar but has since then it has eased to trade at 68.0 today, up 1.8 percent since the start of this year.
    In April dealers reported that the central bank had intervened by buying U.S. dollars and the IMF has recommended the NBKR should only intervene to mitigate excessive volatility.

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