Deflation Arrives, But Prices Will Pick Up Soon

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We hold to our core view for Mongolian inflation to pick up markedly over the medium term, with our end-2009 and end-2010 forecasts set at 3.0% and 9.0% y-o-y respectively. The signing of the Oyu Tolgoi mining agreement in September will be key for driving economic growth higher beyond 2009, lifting demand and consumer prices in the process.