NBKR is recommended to continue monitoring food and non-food prices, wages, remittance flows, credit and import growths: IMF

AKIPRESS.COM - Price stability remains the main objective of monetary policy. Headline inflation increased to 10.6 percent in February 2021, primarily due to exchange rate pass-through and imported food prices, which rose globally, according to the IMF statement following a remote mission from March 12 to March 30 in the context of the 2021 Article IV consultation with the Kyrgyz Republic.
The NBKR's decision to raise the policy rate by 50 basis points in February 2021 signals its commitment to contain inflation, while avoiding a premature withdrawal of stimulus considering the uncertain recovery.
The NBKR is recommended to continue monitoring food and non-food prices, wages, remittance flows, credit and import growths, and other indicators of demand pressures, and should be prepared to tighten the stance of monetary policy further if inflation continues to increase and signs of second-round inflation pressures emerge.
Preserving institutional and operational independence of the central bank will be critical for the efficient conduct of monetary policy.
Clearly communicating the policy direction would help anchor inflation expectations. At the same time, liquidity support should be provided selectively to banks if they experience temporary liquidity pressures.