Introduction to Interest Rates
The National Bank of the Kyrgyz Republic made a significant decision on January 26, 2026, regarding its benchmark interest rate. This decision affects the entire economy, from individuals borrowing money to businesses looking to expand. The interest rate was kept unchanged at 11.00%, maintaining borrowing costs at their highest level since April 2024.
Why the Pause?
This pause in changing the interest rate follows a period of tightening monetary policy. The central bank believes that current monetary conditions are strict enough to control inflation and guide it back towards the target range of 5-7% in the medium term. Essentially, the bank is using high interest rates as a tool to slow down the economy slightly and prevent prices from rising too quickly.
Current Economic Conditions
As of mid-January, annual inflation was at 9.4%, the same as at the end of 2025. While the prices of food have eased slightly, the cost of non-food goods and services continues to increase. Despite these challenges, the economy is doing well, with real GDP expected to grow by about 11.1% in 2025. This growth is primarily driven by the construction and services sectors.
External Risks
The central bank is keeping a close eye on external risks that could affect the economy. These include volatile global food and commodity prices and geopolitical uncertainty. If these risks lead to concerns about price stability, the bank has signaled that it may adjust its policy. This means that the bank is ready to act if it sees signs that inflation could get out of control or if the economy starts to slow down too much.
Next Steps
The next policy meeting is scheduled for February 23, 2026. This will be an important date to watch for anyone interested in the economy, as the bank will reassess the current situation and decide if any changes are needed to the interest rate.
Conclusion
In conclusion, the decision by the National Bank of the Kyrgyz Republic to keep its benchmark interest rate unchanged reflects its careful consideration of the current economic conditions and potential risks. By maintaining high interest rates, the bank aims to control inflation while supporting the continued growth of the economy. As the economic landscape continues to evolve, both domestically and globally, the bank’s future decisions will be crucial in navigating these challenges and achieving a balance between growth and stability.
