Kyrgyzstan holds rate again to maintain stimulus

     Kyrgyzstan's central bank, one of only five central banks to have raised interest rates this year, left its key interest rate steady again to maintain stimulus to the economy, adding it would take "appropriate monetary policy measures" if there are any risks to inflation.
     The National Bank of the Kyrgyz Republic (NBKR) kept its discount rate at 5.0 percent, unchanged since it raised it in February by 75 basis points to dampen inflationary pressures.
     Inflation in Kyrgyzstan - sandwiched between China, Kazakhstan, Uzbekistan and Tajikistan - eased to 6.1 percent as of June 19 from 7.2 percent in May and 8.6 percent in April.
     Weaker domestic demand is determining the downward dynamics of inflation, the central bank said, pointing to the downward trend in remittances and export earnings along with a decline in the output of almost all sectors of the economy.
      The central bank maintained its forecast for inflation to average around its target of 5.0 to 7.0 percent by the end of the year based on the assumption of weaker domestic and foreign demand.
     "The recession in the global economy is expected to be significant," NBKR said, adding its own economy remains susceptible to changes in global and regional economies and international financial organizations are revising forecasts lower despite some signs of recovery in some countries after quarantine measures have been lifted.
      Expansion by the public sector and support of credit operations by the central bank have led to excess liquidity in the banking system and NBKR continues to carry out sterilization operations in the short end of the money market, the central bank said, adding the foreign exchange market has been relatively stable.
     NBKR is in the process of transitioning to a monetary framework that is based on inflation targeting and from mid-March to early April, the Kyrgyzstani som tumbled 18 percent, hitting 84.9 to the U.S. dollar by April 4.
     Since the the som has firmed though it has eased during the month of June and was trading at 75.99 today, down 8.3 percent this year.
   
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