The Bank of Mongolia or Mongolbank announced on Friday to cut its policy interest rate by one percentage point to 10 percent. It also reduced the reserve requirement ratio for commercial banks to 10.5 percent of tugrik deposits, from 12 percent.

B. Bayardavaa, director of the Bank of Mongolia’s monetary policy department, said that as inflation was below its target level, the central bank had decided to cut the benchmark again. “Although inflation is slowly increasing due to the economic recovery and rising demand, the yearly inflation rate is likely to stay at the targeted level,” the central bank said in a statement.

In February, the annual inflation rate was 6.9 percent. The target for this year is 8 percent. On 25 December, the policy key was also cut by one percentage point.

Mongolia has some of the world’s highest interest rates, averaging 19.4 percent in January, according to the central bank. The high rates have reduced economic activity and hurt small businesses, analysts say.

Mongolia agreed to a USD 5.5 billion economic bailout from the IMF last year as part of its efforts to relieve debt pressures and stabilise the currency. The IMF said last month Mongolia’s economy is projected to grow 5 percent in 2018 and 6.3 percent next year, helped by foreign coal sales and improved domestic demand.