The Bank of Mongolia reported that the decision to retain the policy rate at 10 percent would support economic and business activities. In addition, macro prudential policy states that non-mortgaging consumer loans will not exceed 30 months and the risk weight of foreign currency loan will be increased from 20 percent to 150 percent.

The macro prudential policy will start implementing on January 1, 2019. A rise in loans might adversely affect on financial stability as it will increase household debt and import value. Therefore, the Central Bank is pursuing policy to limit consumer loans. 

At the June meeting, the BoM decided to limit debt-to-income ratio of consumer loans to less than 70 percent. This time the BoM limited consumer loan to 30 months. In addition, the risk weight has been increased in order to reduce and limit the foreign exchange credit risk.

However, in the next session, consideration should be given to the policy interest rate change and to actions to be taken in case of breaking macro-prudential policy.

Source: BloombergTv.mn