The inflation rate in MN has edged up to 9.20% YoY in November 2025, continuing a gradual rise after a mid-year dip. This figure remains elevated compared to the 12-month average of approximately 8.90%, signaling persistent inflationary pressures. The increase reflects ongoing supply-side constraints and demand resilience amid tightening monetary conditions.

Drivers this month

• Shelter costs contributed 0.22 percentage points (pp) to inflation.
• Food prices rose by 0.15 pp, driven by supply chain disruptions.
• Energy prices stabilized, subtracting -0.05 pp from the headline rate.

Policy pulse

The current 9.20% inflation rate remains well above the central bank’s 4% target, reinforcing the need for continued monetary tightening. The Monetary Policy Committee (MPC) has maintained a hawkish stance, with the benchmark policy rate at 12%, aiming to curb inflation without derailing growth.

Market lens

Immediate reaction: The MN currency (MNT) depreciated 0.30% against the USD within the first hour post-release, while 2-year government bond yields rose by 15 basis points, reflecting increased inflation risk premiums.

Examining core macroeconomic indicators reveals a mixed picture. GDP growth for Q3 2025 slowed to 3.10% annualized, down from 3.50% in Q2, indicating cooling demand. Unemployment remains low at 4.20%, supporting wage growth and consumer spending. The labor market tightness continues to feed into inflationary pressures.

Monetary policy & financial conditions

The central bank’s restrictive stance, with a 12% policy rate, has tightened financial conditions. Credit growth slowed to 5.40% YoY from 6.10% last quarter. Inflation expectations, as measured by breakeven rates, remain elevated at 7.80% for the next two years, suggesting persistent inflation concerns.

Fiscal policy & government budget

Fiscal policy remains moderately expansionary, with a 2025 budget deficit of 3.50% of GDP. Government spending on infrastructure and social programs supports demand but risks overheating the economy. The government has signaled no immediate plans for fiscal tightening, which could complicate inflation control efforts.

Market lens

Immediate reaction: Following the print, MN’s 2-year government bond yields jumped 15 basis points, signaling increased inflation risk. The MNT currency weakened 0.30% against the USD, reflecting concerns over sustained inflation and potential further monetary tightening.

Looking ahead, inflation in MN faces several possible trajectories depending on policy responses and external factors. We outline three scenarios:

Bullish scenario (20% probability)

• Global commodity prices ease, reducing input costs.
• Monetary tightening successfully anchors inflation expectations.
• Inflation falls below 6% by mid-2026, supporting real income growth.

Base scenario (55% probability)

• Inflation remains elevated around 8-9% through early 2026.
• Monetary policy tightens further but with lagged effects.
• Gradual easing of supply chain bottlenecks stabilizes prices.

Bearish scenario (25% probability)

• Geopolitical tensions disrupt energy and food supplies.
• Fiscal stimulus persists, fueling demand-pull inflation.
• Inflation spikes above 10%, forcing aggressive rate hikes and risking recession.

Structural & long-run trends

MN’s inflation dynamics are influenced by structural factors such as a reliance on commodity imports and limited domestic production capacity. Long-run inflation expectations remain elevated, complicating the central bank’s mandate. Demographic shifts and urbanization may also sustain demand pressures over time.

The November 2025 inflation rate of 9.20% YoY in MN signals persistent price pressures despite monetary tightening. Core indicators suggest a resilient economy but with risks from fiscal policy and external shocks. Market reactions underscore concerns about inflation persistence and currency depreciation. Policymakers face a delicate balancing act to contain inflation without stifling growth. Close monitoring of supply-side developments and geopolitical risks will be essential in the coming months.

Since 2020, MN’s inflation rate and the USDMNT exchange rate have shown a strong positive correlation. Periods of rising inflation coincide with MNT depreciation against the USD, reflecting market concerns over purchasing power and monetary policy responses. For example, spikes in inflation during early 2025 corresponded with a 5% MNT weakening, underscoring inflation’s currency impact.

Takeaway: MN’s inflation remains stubbornly high at 9.20% YoY, posing a significant challenge for policymakers balancing growth and price stability amid external uncertainties.