Mongol Bank has revised its inflation outlook, warning that inflation is likely to be slightly higher than previously forecast due to increases in meat prices, fuel costs and state-regulated service fees. According to Ch.Chinzorig, an economist at the Monetary Policy and Research Department of the bank, supply-side factors have become the main drivers behind the recent increase in inflationary pressure.
“Prices of meat, fuel and state-regulated services have increased due to supply-related factors. Therefore, inflation is expected to be slightly higher than our previous projection,” he said. Meat prices have been one of the key factors affecting inflation in recent months. Although prices began gradually declining from the end of June, the pace of price growth remained relatively high.
The central bank noted that after the Naadam Festival, meat supply improved, leading to a decrease in prices. The increased availability of meat in markets is considered a positive development that could help ease inflationary pressure in the coming months. However, the temporary rise in meat prices is estimated to have contributed approximately 0.4 percentage points to overall inflation. Meanwhile, vegetable prices are expected to decline as new domestic crops enter the market from mid-August, which could further support a reduction in food price pressures.
Fuel prices have also contributed to higher inflation. The bank highlighted that rising petroleum product prices globally, driven by geopolitical uncertainty and market conditions, have affected domestic fuel prices. In July, the retail price of AI-92 gasoline increased by 250 MNT per liter in Mongolia. The increase in fuel prices is expected to add around 0.4 percentage points to inflation. Fuel price rises typically have a broad impact on the economy as they raise transportation and production costs, which can eventually affect prices of goods and services. In addition to food and fuel prices, several government-regulated service fees have increased.
The monthly clean water service fee for residential buildings rose by 37.2 percent, while wastewater service fees increased by 53.2 percent. However, Mongol Bank assessed that these increases would have a relatively limited impact on overall inflation due to their smaller share in household consumption expenditure.
The central bank emphasized that while temporary supply-side shocks have pushed inflation higher, improvements in food supply and seasonal factors could help reduce inflationary pressures in the second half of the year.
