Tajikistan raises rate on inflation after RRR also raised

Tajikistan’s central bank, one of the three central banks worldwide to have tightened monetary policy in the months prior to last year’s outbreak of the COVID-19 pandemic, has raised its rate in response to rising inflation, the week after reserve requirements were raised.
The National Bank of Tajikistan (NBT) raised its refinancing rate by 25 basis points to 11.0 percent in the first rate hike since January 2020 at a meeting on Feb. 5 by its monetary policy committee.

“The decision is based on the prospect of the impact of the potential risks for the economy taking into account the increase in inflationary pressures and expectations,” the bank said, adding the tightening aims to ensure inflation returns to its target range.

Just before the pandemic broke out, NBT raised its rate by 50 points but then quickly reversed that tightening in April and July last year, cutting the rate by a total of 200 points.

The rate increase comes after the policy committee at an extraordinary meeting on Jan. 28 approved raising the reserve requirement for banks’ domestic currency liabilities by 200 basis points to 3.0 percent, also citing the threat to its inflation target from rising pressure on prices.
In April last year NBT temporarily cut banks’ reserve requirement by 200 basis points to 1.0 percent from April 1 to Dec. 31, 2020, along with cutting the reserve requirement for foreign currency liabilities to 5.0 percent from 9 percent to provide immediate support for banks’ need for liquidity.
At its meeting on Jan. 28 the foreign currency reserve requirement was also raised back to 9 percent,

NBT has frequently changed its interest rates in recent years and the most recent rate hike is the 8th change in rates -3 rate hikes and 5 rate cuts – since January 2018.

In January and March 2018 NBT carried out two quick rate cuts by a total of 200 basis points but then in February 2019 the rate was raised 75 points.

But a few months later, in May 2019, NBT began easing again with a 150-point rate cut and continued again in November with another 100 point cut, followed by the 50-point hike in January 2020.

Inflation in the Tajikistan, which borders China, Afghanistan, Kyrgyzstan and Uzbekistan, rose to 9.4 percent in December, topping NBT’s target range of 7.0 percent, plus/minus 2 percentage points. Source central bank news

The central bank noted that food prices had risen 13 percent and non-food prices 5.8 percent.