Kyrgyzstan cuts rate 25 bps again, trims inflation outlook

     Kyrgyzstan’s central bank lowered its benchmark discount rate by another 25 basis points to 4.25 percent and lowered its inflation forecast once again amid moderate aggregate demand, the growth prospects of its trading partners and the low risk of inflation this year.
     However, the National Bank of the Kyrgyz Republic (NBKR) cautioned it may consider changing the current direction of monetary policy in the event of internal and external risks.
     It is the 7th rate cut by NBKR since March 2016 and the second this year following a cut in February. The discount rate has been cut by 575 basis points since March 2016.
     The central bank said the country’s economy had developed in line with its expectations and price dynamics remain low while economic activity has increased.
     Kyrgyzstan suffered from deflation from February through April but as of May 17 annual inflation was 0.3 percent, up from minus 0.5 percent in April, as the decline in food prices slowed to around zero, NBKR said.
     Core inflation, however, continued to decline to 0.7 percent in March from 0.8 percent in February, hitting lows not seen since early 2017, the central bank added.
     With food prices on world markets lower than forecast due to higher supply, NBKR said it was not expecting any significant risk to domestic inflation from external sources.
      NBKR again lowered its inflation forecast and now expects maximum inflation of 4.0 percent by the end of this year, with an annual average of 1.0 percent.
      As in March, the central bank said it expects inflation in the medium term to be within its target range of 5.0 to 7.0 percent.
      In March the central bank forecast inflation would could reach 5 percent by the end of this year and average around 3.0 percent this year, down from December’s forecast inflation would average 5-7 percent this year.
      Kyrgyzstan’s economy is continuing to expand, with real gross domestic product in the first four months of this year up by 5.7 percent and up by 1.6 percent when excluding the Kumtor gold mine.

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