The Monetary Policy Committee of Mongol Bank announced at its regular meeting held on June 12 and 13 that it will keep the policy interest rate unchanged at 12 percent amid gradually slowing inflation and weaker-than-expected economic growth in the first quarter of 2025.
The committee also introduced a new macroprudential measure, setting a maximum debt-to-income (DTI) ratio of 50 percent for newly issued bank loans and other consumer loans. The move is intended to mitigate household debt risks and strengthen financial sector stability.
Annual inflation declined to 8.3 percent nationwide and 9.4 percent in Ulaanbaatar as of May 2025, largely due to moderating prices of staple foods such as meat and flour, as well as imported goods. Despite this progress, inflation remains above the central bank’s target range, influenced by rising prices of certain state-regulated goods and services.
Mongol Bank aims to guide inflation toward six percent (±2 percentage points) in 2026, and five percent (±2 percentage points) from 2027 onwards. The central bank emphasized that future inflation dynamics will hinge on government project financing, export earnings, exchange rate trends, and food prices affected by weather conditions and supply constraints.
The country’s economy grew by just 2.4 percent in the first quarter of 2025, falling short of forecasts. The slowdown was attributed to reduced output in key mineral sectors, a significant drop in transportation revenues, and a contraction in tax and trade-related production. However, the committee noted that several factors could support growth in the remainder of the year, including a recovery in the agricultural sector following the severe dzud winter, increased copper concentrate production, and the launch of new construction projects. While geopolitical tensions and shifting global trade policies continue to weigh on external demand and commodity prices, relatively high prices for gold and copper are providing a cushion for Mongolia’s trade balance.
Moreover, Mongol Bank raised concerns about the rapid increase in pension-secured loans in recent years, warning that these products are placing a growing financial burden on elderly borrowers. The central bank signaled that appropriate regulation of pension loans is necessary to prevent further strain on vulnerable households. The bank stated that future policy decisions will be made based on evolving domestic and external conditions, and how inflation and economic prospects develop in the coming months.
Governor of the bank B.Lkhagvasuren reported, “Pension loans have grown rapidly in recent years, and the debt burden and financial burden on borrowers are high. Considering this, the committee decided to make adjustments at its regular meeting in March 2025, but there is an urgent need to make adjustments. The regulatory measures have been taken to address the difficulties faced by borrowers with outstanding pension loans and high loan payments. This measure is aimed at supporting them to repay their previous pension loans and meet their financial needs for new loans, while gradually reducing the burden of loan payments. Since pension loans are similar to consumer loans secured by salary, a gradual transition to applying one standard will be implemented.”
